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Public Debt in a Descriptive Endogenous Growth Model

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  • Alfred Greiner

    (Department of Business Administration and Economics, Bielefeld University)

Abstract

In this paper we analyze a descriptive endogenous growth model with public debt. The government runs into debt, but, the primary surplus is a positive function of public debt such that the debt to GDP ratio becomes a mean- reverting process. A balanced budget scenario yields a higher long-run growth rate than a scenario with permanent deficits if and only if the public deficit exceeds the net saving out of government bonds. Further, multiple balanced growth paths can arise and reducing the reaction of the primary surplus to public debt can generate endogenous cycles via a Hopf bifurcation.

Suggested Citation

  • Alfred Greiner, 2020. "Public Debt in a Descriptive Endogenous Growth Model," Annals of Economics and Finance, Society for AEF, vol. 21(1), pages 173-187, May.
    • Handle: RePEc:cuf:journl:y:2020:v:21:i:1:greiner
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Public debt; Balanced budget; Endogenous growth; Stability;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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