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Does an active fiscal policy work under a high level of government debt?

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  • J. H. Ko

Abstract

This article theoretically investigates the effect of expansionary fiscal shocks when the government faces a high debt-to-GDP ratio, under the regime of an active fiscal policy with a passive monetary policy in the terminology of Leeper (1991). We find that expansionary fiscal shocks become less effective when the government faces a high level of debt because the wealth effect on households decreases.

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  • J. H. Ko, 2015. "Does an active fiscal policy work under a high level of government debt?," Applied Economics Letters, Taylor & Francis Journals, vol. 22(13), pages 1083-1088, September.
    • Handle: RePEc:taf:apeclt:v:22:y:2015:i:13:p:1083-1088
    DOI: 10.1080/13504851.2014.1002883
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    Cited by:

    1. Gonzalo F. de-Córdoba & Benedetto Molinari & José L. Torres, 2021. "Public Debt Frontier: A Python Toolkit for Analyzing Public Debt Sustainability," Sustainability, MDPI, vol. 13(23), pages 1-25, November.
    2. Roger Alejandro Banegas Rivero & Marco Alberto Nunez Ramirez & Sacnicte Valdez Del Rio, 2021. "Interaction of Economic Policy. Lessons on Social Welfare and Risk Premium," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 17(1), pages 7-29.
    3. Roumeen Islam, 2017. "Growth after Crisis in Europe: An Interdependence of Macroeconomic and Structural Policies," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 11(2), pages 19-62, December.
    4. Gonzalo F. de-Córdoba & Benedetto Molinari & José L. Torres, 2018. "Public Debt Frontier. A toolkit for analyzing fiscal policy and debt sustainability," Working Paper series 18-36, Rimini Centre for Economic Analysis.

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