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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:...
Persistent link: https://www.econbiz.de/10013114337
Rising federal debt threatens to reduce the growth of the economy, people’s living standards, wages, and the standard of living. A policy solution needs to respect many constraints, most importantly, that it is seen as fair — both within generations and across generations. This article...
Persistent link: https://www.econbiz.de/10013250366
Political economy theory expects politicians to use budget deficits to engineer an election-timed boom, known as the political business cycle. We challenge and contextualize this view by incorporating the financial constraints faced by governments into an electoral framework. We argue that the...
Persistent link: https://www.econbiz.de/10013006570
Sudan faces an exceedingly high debt burden for an economy of its size. Standing at 80% of Gross Domestic Product (GDP), Sudan's external debt was US$43.6 billion in 2014, of which 87% was arrears. As part of the secession agreement, Sudan would take over all of the pre-secession debt provided...
Persistent link: https://www.econbiz.de/10012920764
This paper explores the effects of fiscal transparency on the borrowing costs of 33 emerging and developing economies (EMs), and on foreign demand for their sovereign debt. Using multiple indicators, including a constructed one based on the published data in the IMF's Government Finance...
Persistent link: https://www.econbiz.de/10012910360
We analyse the international transmission of interest rates by focusing on the role of the accumulation of international reserves and on the financing of sovereign debt. An increase in foreign exchange reserves is expected to moderate the influence of U.S. interest rates. However, a high level...
Persistent link: https://www.econbiz.de/10013240933
In this note we theoretically investigate the question of whether the relationship between public debt and economic growth is characterized by an inverse U-shaped functional form. Starting point of our analysis is the paper by Checherita-Westphal et al. (2012) who present an endogenous growth...
Persistent link: https://www.econbiz.de/10013089458
Accumulating debt raises concerns about its implications for macroeconomic stability. This paper sheds light on the implications of high indebtedness for the macroeconomic volatility by identifying the main drivers of the evolution of debt in a set of countries. The country choice was based on...
Persistent link: https://www.econbiz.de/10013075183
This paper studies fiscal policy effects in developing countries with external debt and sovereign default risks. State-dependent distributions of fiscal limits are simulated based on macroeconomic uncertainty and fiscal policy specifications. The analysis shows that expected future revenue plays...
Persistent link: https://www.econbiz.de/10013055258
This paper discusses the type of trajectory a country's public debt path follows. In particular, a Markov switching ADF model is used to assess the sustainability of public debt by testing whether a government's present value borrowing constraint holds. Building on the work of Raybaudi et al....
Persistent link: https://www.econbiz.de/10010238831