When the transmission channel between savers and borrowing firms is disturbed, firms may find themselves borrowing-constrained. I study the optimal fiscal policy response to a tightening borrowing constraint in a simple two-period model. I find that it is not optimal to subsidize firms, although...

The rapidly growing national debt in the U.S. since the 1970s has alarmed and intrigued the academic world. Consequently, the concept of dynamic (in)efficiency in an overlapping generations (OLG) world and the importance of the heterogeneous-agents and incomplete markets (HAIM) hypothesis to...

In this paper we analyze an endogenous growth model with public capital and public debt where we posit that the primary surplus of the government is a positive function of cumulated past debt with an exponentially declining weight put on debt further back in time. We consider two scenarios:...

This paper analyzes the tradeoffs between savings, debt and public investment in the Republic of Congo, a developing country with looming oil exhaustibility concerns. Our results highlight the risks to fiscal and capital sustainability of oil exporting countries from large scaling-up in public...

The paper presents and estimates an endogenous growth model with public capital. In contrast, however, to recent studies on economic growth and policy, we allow for capital market borrowing by the government. Since the behavior by the government (tax rates, spending and borrowing) does not...

This paper evaluates optimal public investment and fiscal policy for countries characterized by limited tax and debt capacities. We study a non stochastic CRS endogenous growth model where public expenditure is an input in the production process, in countries where distortions and limited...

This paper evaluates optimal public investment and fiscal policy for countries characterized by limited tax and debt capacities. We study a non stochastic CRS endogenous growth model where public expenditure is an input in the production process, in countries where distortions and limited...

In the present paper an empirical analysis will point out that austerity measures due to high levels of government debt as a percentage of GDP have (among others) a positive impact on social unrest measured by the number of strikes. The empirical findings of the present paper support the view of...

In the present paper an empirical analysis will point out that government debt as a percentage of GDP has a negative impact (among others) on banking profitability. This impact will be even worse when this debt as a percentage of GDP exceeds a certain critical level. The sample covers during the...