In this paper, we compare growth and welfare effects of various budget rules within an endogenous growth model with productive public capital, utility enhancing public consumption and public debt. We find that a fixed deficit regime does not affect the long run growth rate compared to a balanced...

This paper considers an endogenous growth model with public capital and government debt. In setting the level of public investment each period, the government is assumed to follow two fiscal rules that are commonly used in the growth literature: public investment is either equal to a constant...

This paper examines the effects of government debt policies with imperfect substitutability between securities issued by different countries. It puts forward an intertemporal model of a small open economy to analyze the effects of government debt on the real interest rate, economic growth,...

The public debt overhang spread across advanced countries, and the reform of the Stability and Growth Pact in the Euro Zone, have revived the polarization between those who think that debt is always good and those who think that debt is always bad. This paper presents a normative model of...

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...

In this paper, we compare growth and welfare effects of various budget rules within an endogenous growth model with productive public capital, utility enhancing public consumption and public debt. We find that introducing a fixed deficit regime does not affect the long run growth rate compared...

In this paper we present an endogenous growth model with public capital, public debt and where real wages are either flexible or rigid due to labor market imperfections. With flexible wages, a balanced budget scenario yields the highest balanced growth rate. Further, simulations suggest that...

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:...

Uncertainty about the future preferences of the government may induce policy makers to run excessive budget deficits. As a solution to this problem, economists have proposed to impose a binding debt rule. In this paper we argue that a binding debt rule does not eliminate the distortions due to...

It is by now a widely shared insight that fiscal policy needs to be re-strengthened as a macroeconomic policy instrument within European macroeconomic policies: Recent experiences with austerity policies, new research regarding the size of the fiscal multiplier and the fact that monetary policy...