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© 2013

Sustainability and Optimality of Public Debt

Book

Table of contents

  1. Front Matter
    Pages I-XII
  2. Michael Carlberg, Arne Hansen
    Pages 3-4
  3. Michael Carlberg, Arne Hansen
    Pages 5-7
  4. The Closed Economy

    1. Front Matter
      Pages 9-9
    2. Michael Carlberg, Arne Hansen
      Pages 11-76
    3. Michael Carlberg, Arne Hansen
      Pages 77-103
    4. Michael Carlberg, Arne Hansen
      Pages 104-130
  5. The Small Open Economy

    1. Front Matter
      Pages 131-131
    2. Michael Carlberg, Arne Hansen
      Pages 133-150
    3. Michael Carlberg, Arne Hansen
      Pages 151-160
  6. Two Countries

    1. Front Matter
      Pages 161-161
    2. Michael Carlberg, Arne Hansen
      Pages 163-178
    3. Michael Carlberg, Arne Hansen
      Pages 179-185
    4. Michael Carlberg, Arne Hansen
      Pages 187-196
    5. Michael Carlberg, Arne Hansen
      Pages 197-198
  7. Back Matter
    Pages 199-212

About this book

Introduction

This book studies the sustainability and optimality of public debt under different scenarios: the closed economy, the small open economy, and a two-country setting. Sustainability refers to the existence and the stability of the long-run equilibrium. Optimality relates to the path of public debt that maximizes discounted utility. The analysis is conducted within the framework of the Solow model, the overlapping generations model and the infinite horizon model. The government can follow different strategies, it either fixes the deficit ratio or the tax rate. As a result, a fixed deficit ratio generally can be sustained. By contrast, a fixed tax rate generally cannot be sustained. Depending on the chosen fiscal strategy, there exists either an optimal deficit ratio or an optimal tax rate that maximizes the sum of consumption and government purchases per capita.

Keywords

Economic Growth Fiscal Policy International Economy Public Debt Public Finance

Authors and affiliations

  1. 1., Department od EconomicsHelmut Schmidt UniversityHamburgGermany
  2. 2., Department of EconomicsHelmut Schmidt UniversityHamburgGermany

About the authors

Michael Carlberg is Professor at Helmut Schmidt University in Hamburg, Germany. His research is on Macroeconomics, Monetary Economics, and International Economics.

Arne Hansen is research assistant at Helmut Schmidt University in Hamburg, Germany. His research is on Economic Growth, Public Debt, and International Economics.

Bibliographic information

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