They include the ideological character of governments, cabinet duration and type of government, electoral cycle, domestic fiscal institutions, fiscal rules, veto players, economic culture, public opinion, state traditions, and governing competence of elites. Download preview PDF. It examines patterns in public debt accumulation, including the roles of rent-seeking behaviour and economic, financial, and geo-strategic crises. Over 10 million scientific documents at your fingertips. debt ratio is projected to rise further until 2012, albeit at a slower pace that refl ects the recovery and some planned fi scal consolidation measures. This paper analyzes the dynamics of public debt in a simple two-period overlapping-generations model of endogenous growth with productive public goods. The United Nations Conference on Trade and Development (UNCTAD) has therefore called for a US$2.5 trillion coronavirus crisis package for developing countries[1] while […] Not logged in This solvency question itself does, however, not stand in the foreground of this chapter. We study how macroeconomic shocks affect U.S. public debt dynamics using a VAR with debt feedback. Yet, the effect is not statistically significant. These keywords were added by machine and not by the authors. It examines patterns in public debt accumulation, including the roles of rent-seeking behaviour and economic, financial, and geo-strategic crises. You could not be signed in, please check and try again. In this work, we study the dynamics of public sector debt, analyzing both theoretically and empirically the impact of output growth, interest costs and expenditure shocks on debt.

Historical Legacies and Long-Term Political Challenges, 18 The Achilles Heel of Post-War European Integration. Downloadable! Cherif, Reda and Hasanov, Fuad, Public Debt Dynamics: The Effects of Austerity, Inflation, and Growth Shocks (September 2012). , and if you can't find the answer there, please FAQs contact us

Suggested Citation, 700 19th Street, N.W.Washington, DC 20431United States, International Monetary Fund (IMF) Research Paper Series, Subscribe to this free journal for more curated articles on this topic, Macroeconomics: Monetary & Fiscal Policies eJournal, Subscribe to this fee journal for more curated articles on this topic, Public Economics: National Budget, Deficit, & Debt eJournal, We use cookies to help provide and enhance our service and tailor content.By continuing, you agree to the use of cookies. 12/230, Available at SSRN: If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday. We study how macroeconomic shocks affect U.S. public debt dynamics using a VAR with debt feedback. Following a fiscal austerity shock, the debt ratio initially declines and then returns to its pre-shock path. It is noteworthy that this negative short run effect on the drift of d may also exist in the medium run although tax revenues then get smaller compared to the short run since higher tax rates harm wealth accumulation. Cite as. This is a preview of subscription content. debt so adversely influencing debt dynamics, whereas higher nominal GDP growth will tend to lower the debt-to-GDP ratio by increasing the denominator. Simultaneously, however, less wealth implies less resources for capital accumulation which reduces government expenditure. This argumentation need no longer hold in an overlapping generations model as Buiter/Kletzer (1997) discuss in a recent paper.

Historical Legacies and Long-Term Political Challenges, 18 The Achilles Heel of Post-War European Integration, States, Debt, and Power: 'Saints' and 'Sinners' in European History and Integration, 2 The Nature of Sovereign Creditworthiness, 5 Financial Repression, Debasement, and the Historic Arc of Default, 6 Theological Traces and Social Contexts, 7 The Dynamics of Public Debt in Historical Perspective, 8 Law, Public Debt, and the Paradoxes of Power, 9 Economic Cultures, Ideologies of Debt, and State Virtue, 12 Professional Consensus, Political Silence, and Sovereign Creditworthiness, 13 The Dynamics of External Imbalances and Debt, 14 Which Truth? This process is experimental and the keywords may be updated as the learning algorithm improves. The analysis of these drivers leads to the conclusion that formal debt sustainability analysis fails to address key determinants of public debt, notably governing competence. Fiscal Policy, Public Debt and the Term Structure of Interest Rates, https://doi.org/10.1007/978-3-642-58595-1_6, Lecture Notes in Economics and Mathematical Systems.

The reason is that we always assume that the tax rate and the public expenditure ratio are subject to those fiscal policy constraints developed in Chapter 3. Please, subscribe or login to access full text content. Published to Oxford Scholarship Online: August 2014, DOI: 10.1093/acprof:oso/9780198714071.001.0001, PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). Following a fiscal austerity shock, the debt ratio initially declines and then returns to its pre-shock path. If this decreasing effect on government expenditure is stronger than the loss in tax revenues than the primary deficit improves. In our specification, the debt ratio is stationary, whereas a VAR excluding debt may imply an explosive debt path. The Power of Numeric Indicators and Probabilistic Reasoning about Public Debt, 17 Still the ‘Old’ Europe?

Keywords: Public Debt, Var, Impulse Responses, Economic Growth, Economic Models, External Shocks, Fiscal Consolidation, Suggested Citation: Abstract. An inflation shock only slightly reduces the debt ratio for a few quarters. A positive growth shock unambiguously lowers debt. The debt is a stock variable, measured at a specific point in time, and it is the accumulation of all prior deficits. This page was processed by aws-apollo4 in 0.203 seconds, Using the URL or DOI link below will ensure access to this page indefinitely. These conditions were shown to fulfill the transversality condition, thereby ruling out Ponzi-game dynamics of public debt as pointed out by Obstfeld/Rogoff (1996, p. 717) 1. pp 205-228 | The debt ratio is usually associated with the question whether a present stock of public debt is compatible with default-free future debt service which would guarantee intertemporal solvency of the government. A possible way out of this dilemma could be the following: one postulates a specific functional form of k depending on r, Note that we have shown in Proposition 6.1 that for values of r. For our parameter constellation, the debt ratio would have to exceed 300% by far in order to yield explosive debt ratio paths.

This chapter provides a critique of formal debt sustainability analysis, including the Maastricht Treaty fiscal rules, stressing the problems of one-size-fits-all approaches. © 2020 Springer Nature Switzerland AG.

To troubleshoot, please check our Following a fiscal austerity shock, the debt ratio initially declines and then returns to its pre-shock path. The Power of Numeric Indicators and Probabilistic Reasoning about Public Debt, 17 Still the ‘Old’ Europe? If you think you should have access to this title, please contact your librarian. In this chapter, we will address the last economic question resulting from the chosen model framework: how does public indebtedness evolve and how does fiscal policy and financial market interaction influence this evolution? We will take ‘public debt per output’ (i.e. This service is more advanced with JavaScript available, Fiscal Policy, Public Debt and the Term Structure of Interest Rates

These conditions were shown to fulfill the transversality condition, thereby ruling out Ponzi-game dynamics of public debt as pointed out by Obstfeld/Rogoff (1996, p. 717) 1. The primary budget balance, defi ned as the budget balance net of interest payments, is a key determinant of government debt dynamics. This slows down debt accumulation so that the negative sign of the drift effect may remain even in the medium run. Part of Springer Nature. More formally, the importance of the interest-rate-growth differential can be seen from the government budget identity,3 whereby the change in the net government debt-to-GDP ratio (d) is Thus, the main purpose in this chapter is to analyze the model dynamics of the debt ratio, especially with regard to the underlying parameters and variables characterizing fiscal policy and financial market behavior. The chapter looks at macroeconomic drivers of debt sustainability, notably GDP growth, as well as at structural drivers, in particular sector balance and dependency.

Thus, the main purpose in this chapter is to analyze the model dynamics of the debt ratio, especially with regard to the underlying parameters and variables characterizing fiscal policy and financial market behavior.   104.237.130.174. the debt ratio) as the appropriate measure for public indebtedness.

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