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National Debt Sustainability and the Dynamics in the Economy of Diamond

Author

Listed:
  • de la Croix, D.
  • Michel, P.

Abstract

We analyze the effect of a constant debt policy on capital accumulation and provide an indepth treatment of the dynamics in the economy of Diamond. We derive the conditions for avoiding a debt crisis in both the short-run and the long-run and provide geometrical tools to analyze the issue of sustainability. There is always a level of debt enduring that any level of capital between 0 and an upper limit, and in particular the Golden rate equilibrium, exists as a steady-state equilibrium ,yet it is not necessarily stalbe. We also discuss poverty trap issues.

Suggested Citation

  • de la Croix, D. & Michel, P., 1999. "National Debt Sustainability and the Dynamics in the Economy of Diamond," G.R.E.Q.A.M. 99a56, Universite Aix-Marseille III.
    • Handle: RePEc:fth:aixmeq:99a56
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    Cited by:

    1. Joonhyuk Song, 2009. "An Empirical Evaluation of Fiscal Sustainability Near and Far," Korean Economic Review, Korean Economic Association, vol. 25, pages 133-164.

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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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