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Public debt and aggregate stability with endogenous growth and a state-dependent consumption tax

Author

Listed:
  • Greiner Alfred

    (Bielefeld University)

  • Anton Bondarev

    (University of Basel)

Abstract

We analyze a basic endogenous growth model with public debt and a state-dependent consumption tax rate. We show that the balanced budget rule guarantees that the long-run growth path of the economy is unique and saddle point stable unless the tax rate is strongly regressive. In case of a strongly regressive consumption tax rate over a certain range, multiple balanced growth paths and local indeterminacy can arise.

Suggested Citation

  • Greiner Alfred & Anton Bondarev, 2015. "Public debt and aggregate stability with endogenous growth and a state-dependent consumption tax," Economics Bulletin, AccessEcon, vol. 35(4), pages 2601-2609.
    • Handle: RePEc:ebl:ecbull:eb-15-00503
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2015/Volume35/EB-15-V35-I4-P261.pdf
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    References listed on IDEAS

    as
    1. Alfred Greiner & Bettina Fincke, 2015. "Public Debt, Sustainability and Economic Growth," Springer Books, Springer, edition 127, number 978-3-319-09348-2, September.
    2. Nourry, Carine & Seegmuller, Thomas & Venditti, Alain, 2013. "Aggregate instability under balanced-budget consumption taxes: A re-examination," Journal of Economic Theory, Elsevier, vol. 148(5), pages 1977-2006.
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    Cited by:

    1. Atsumasa Kondo, 2016. "Sustainability of Public Debt in an AK Model with Complex Tax System," Discussion Papers CRR Discussion Paper Series A: General 21, Shiga University, Faculty of Economics,Center for Risk Research.
    2. Bondarev, Anton, 2018. "Heterogeneous R&D spillovers and sustainable growth: Limits to efficient regulation," Working papers 2018/04, Faculty of Business and Economics - University of Basel.
    3. Micheli, Martin, 2020. "Aggregate stability under a budget rule and labor mobility," Economic Modelling, Elsevier, vol. 93(C), pages 510-519.
    4. Atsumasa Kondo, 2016. "Interconnection of Fiscal Policies on Sustainability of Public Debt," Discussion Papers CRR Discussion Paper Series A: General 20, Shiga University, Faculty of Economics,Center for Risk Research.

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    More about this item

    Keywords

    Balanced budget; public debt; stability; endogenous growth;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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