Public debt is one of the important economic variables that quantitatively describes a nation's economy. Because bankruptcy is a risk faced even by institutions as large as governments (e.g. Iceland), national debt should be strictly controlled with respect to national wealth. Also, the problem...

In a recent paper, Minea and Villieu (2009) assert that the 'golden rule of public finance' implies a lower growth rate than the balanced-budget rule. Their contribution is misleading because it is not the 'golden rule of public finance' that generates their result but rather the fact that...

We present a monetary endogenous growth model and analyze the effects of fiscal and monetary policy with real money as an argument in the utility function. We show that a balanced government budget gives a higher balanced growth rate and lower inflation than a situation with permanent public...

In this paper our objective is to analyze sustainable debt policy rules and economic growth using a model of endogenous economic growth theory. For the government it is possible to run into debt, but, the primary surpulus is a positive linear function of the debt-to-GDP ratio which guarantees...

The effect of public investment on economic growth is a crucial public policy issue. Empirical research into this question was stimulated by Aschauer (1989), who suggested that public capital has a powerful impact on the productivity of private capital.Aschauer's results were controversial and...

In this paper we analyze a descriptive endogenous growth model with public debt. The government can run into debt, but, the primary surplus is a positive function of the debt to GDP ratio such that the debt ratio becomes a mean-reverting process. We show that a balanced budget scenario yields a...

Barro's model is an AK model, and there cannot be dynamic ineffciency since the social yield of the capital is higher than the growth rate. But it may be that the private yield and thus the interest rate are lower than the growth rate. One can thus have a Ponzi game and the government can allow...

We analyze how different budgetary rules affect the stability of an economy in a basic endogenous growth model with public debt and a state-dependent consumption tax rate. We show that a discretionary policy implies that the government violates its inter-temporal budget constraint along a...

In this paper we analyze an endogeneous growth model with human capital that results from public educational spending. We allow for public debt and analyze three different debt policies: a balanced government budget, a slight deficit policy where debt grows but less than GDP, and a strong...

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...