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Fiscal Federalism And Public Debt Fiscal Instability Due To Multi Level Borrowing In A Model Of Neoclassical Growth "

Author

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  • Holger Kächelein

    (Faculty of Business Administration and Economics University of Tirana Tirana, Albania")

Abstract

A neoclassical growth model with constant saving rates, publicly provided services and public debt is used to analyse the impact of a federal structure. The main focus is on the existence and the stability of steady states. It is shown that the equilibrium in a federation with publicly provided services is more likely to be unstable than the equilibrium with public capital as a substitute. Moreover, only dynamic inefficient solutions are stable. Due to additional instability, the need for flexible vertical assignment of public functions is further stressed. "

Suggested Citation

  • Holger Kächelein, 2011. "Fiscal Federalism And Public Debt Fiscal Instability Due To Multi Level Borrowing In A Model Of Neoclassical Growth "," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice (1954-2015), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 58, pages 123-132, november.
    • Handle: RePEc:aic:journl:y:2011:v:57:p:123-132
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    References listed on IDEAS

    as
    1. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    2. Robert J. Barro & Xavier Sala-I-Martin, 1992. "Public Finance in Models of Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(4), pages 645-661.
    3. Wildasin, David E., 2004. "The Institutions of Federalism: Toward an Analytical Framework," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(2), pages 247-272, June.
    4. Ms. Maria A Albino & Mr. Raju J Singh & Mr. Ehtisham Ahmad, 2005. "Subnational Public Financial Management: Institutions and Macroeconomic Considerations," IMF Working Papers 2005/108, International Monetary Fund.
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    More about this item

    Keywords

    Public debt; fiscal federalism; growth; stability;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing

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