Sustainability and Optimality of Public Debt

Sustainability and Optimality of Public Debt

by Michael Carlberg, Arne Hansen
     
 

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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…  See more details below

Overview

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.

Product Details

ISBN-13:
9783642446306
Publisher:
Springer Berlin Heidelberg
Publication date:
01/29/2015
Edition description:
2nd ed. 2013
Pages:
212
Product dimensions:
6.10(w) x 9.25(h) x 0.02(d)

Related Subjects

Meet the Author

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.

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