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Demand-led growth with debt constraints

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  • White, Graham

Abstract

The paper explores the implications of different autonomous demands, with differing rates of growth, in a demand-led growth model where policy makers are concerned about the ratios of public sector debt to income and external debt to income. The actual growth rate is explained in terms of the growth rate of aggregate demand, with emphasis in the formation of expectations about growth in the latter; and the relative importance in this regard of realised aggregate demand growth and autonomous demand growth, the latter being governed by export demand and public sector expenditure. Debt constraints - specifically, the ratio of public sector debt to output and the ratio of external debt to output - become relevant in the determination of the growth rate of government expenditure. The paper explores the likely interactions between debt constraints, the growth rate of aggregate demand and autonomous demand by means of dynamic simulations.

Suggested Citation

  • White, Graham, 2008. "Demand-led growth with debt constraints," Working Papers 2008-01, University of Sydney, School of Economics.
    • Handle: RePEc:syd:wpaper:2123/7068
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    File URL: http://hdl.handle.net/2123/7068
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    References listed on IDEAS

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    1. Neri Salvadori (ed.), 2006. "Economic Growth and Distribution," Books, Edward Elgar Publishing, number 3798.
    2. Antonella Palumbo & Attilio Trezzini, 2003. "Growth without normal capacity utilization," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 10(1), pages 109-135.
    3. Neri Salvadori, 2004. "Economic growth and distribution: on the nature and causes of the wealth of nations," Economics Bulletin, AccessEcon, vol. 28(18), pages 1.
    4. Nelson H. Barbosa-Filho, 1999. "A Note on the Theory of Demand-Led Growth," SCEPA working paper series. 1999-06, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    5. Sergio Cesaratto & Franklin Serrano & Antonella Stirati, 2003. "Technical Change, Effective Demand and Employment," Review of Political Economy, Taylor & Francis Journals, vol. 15(1), pages 33-52.
    6. Graham White, 2008. "Growth, Autonomous Demand And A Joint‐Product Treatment Of Fixed Capital," Metroeconomica, Wiley Blackwell, vol. 59(1), pages 1-26, February.
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