IDEAS home Printed from https://ideas.repec.org/p/lev/wrkpap/wp_843.html
   My bibliography  Save this paper

Is a Very High Public Debt a Problem?

Author

Listed:
  • Pedro Leao

Abstract

This paper has two main objectives. The first is to propose a policy architecture that can prevent a very high public debt from resulting in a high tax burden, a government default, or inflation. The second objective is to show that government deficits do not face a financing problem. After these deficits are initially financed through the net creation of base money, the private sector necessarily realizes savings, in the form of either government bond purchases or, if a default is feared, "acquisitions" of new money.

Suggested Citation

  • Pedro Leao, 2015. "Is a Very High Public Debt a Problem?," Economics Working Paper Archive wp_843, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_843
    as

    Download full text from publisher

    File URL: http://www.levyinstitute.org/pubs/wp_843.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. John Smithin, 2007. "A real interest rate rule for monetary policy?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 30(1), pages 101-118.
    2. James Juniper & Timothy P. Sharpe & Martin J. Watts, 2014. "Modern monetary theory: contributions and critics," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 37(2), pages 281-307, December.
    3. Mathew Forstater, 1999. "Functional Finance and Full Employment: Lessons from Lerner for Today," Journal of Economic Issues, Taylor & Francis Journals, vol. 33(2), pages 475-482, June.
    4. Thomas I. Palley, 2015. "Money, Fiscal Policy, and Interest Rates: A Critique of Modern Monetary Theory," Review of Political Economy, Taylor & Francis Journals, vol. 27(1), pages 1-23, January.
    5. Eric Tymoigne & L. Randall Wray, 2013. "Modern Money Theory 101: A Reply to Critics," Economics Working Paper Archive wp_778, Levy Economics Institute.
    6. Philip Arestis & Malcolm Sawyer, 2010. "The return of fiscal policy," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 32(3), pages 327-346, April.
    7. Mathew Forstater, 1999. "Functional Finance and Full Employment: Lessons from Lerner for Today," Economics Working Paper Archive wp_272, Levy Economics Institute.
    8. Claude Gnos & Louis-Philippe Rochon (ed.), 2006. "Post-Keynesian Principles of Economic Policy," Books, Edward Elgar Publishing, number 3407.
    9. Mathew Forstater, 1999. "Functional Finance and Full Employment: Lessons from Lerner for Today," Macroeconomics 9908002, University Library of Munich, Germany.
    10. William Mitchell & Joan Muysken, 2008. "Full Employment Abandoned," Books, Edward Elgar Publishing, number 1188.
    11. Claude Gnos & Louis-Philippe Rochon, 2006. "Post-Keynesian Principles of Economic Policy," Post-Print halshs-00114699, HAL.
    12. L. R. Wray, 1990. "Money and Credit in Capitalist Economies," Books, Edward Elgar Publishing, number 474.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marc Audi & Amjad Ali, 2023. "Public Policy and Economic Misery Nexus: A Comparative Analysis of Developed and Developing World," International Journal of Economics and Financial Issues, Econjournals, vol. 13(3), pages 56-73, May.
    2. Jussi Ahokas, 2012. "Geographies of Monetary Economy and the European economic crisis," ERSA conference papers ersa12p437, European Regional Science Association.
    3. Aloys L. Prinz & Hanno Beck, 2021. "Modern Monetary Theory: A Solid Theoretical Foundation of Economic Policy?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 49(2), pages 173-186, June.
    4. Enrico Sergio Levrero, 2018. "Sulle critiche e gli ostacoli alla proposta dello Stato come "Occupatore di ultima istanza"," Working Papers 0035, ASTRIL - Associazione Studi e Ricerche Interdisciplinari sul Lavoro.
    5. Eckhard Hein & Christian Schoder, 2011. "Interest rates, distribution and capital accumulation -- A post-Kaleckian perspective on the US and Germany," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(6), pages 693-723, November.
    6. Pavlina R. Tcherneva, 2008. "The Return of Fiscal Policy: Can the New Developments in the New Economic Consensus Be Reconciled with the Post-Keynesian View?," Economics Working Paper Archive wp_539, Levy Economics Institute.
    7. Yasuhito Tanaka, 2023. "Government deficit and “The World’s smallest macroeconomic model” by Paul Krugman," Financial Economics Letters, Anser Press, vol. 2(1), pages 44-53, September.
    8. Faruk Ülgen, 2012. "Financial instability and functional finance : a Lerner-Minsky perspective," Post-Print halshs-00843754, HAL.
    9. Philip Arestis & Malcolm Sawyer, 2010. "What Monetary Policy after the Crisis?," Review of Political Economy, Taylor & Francis Journals, vol. 22(4), pages 499-515.
    10. Zdravka, Todorova, 2009. "Employer of Last Resort Policy and Feminist Economics: Social Provisioning and Socialization of Investment," MPRA Paper 16240, University Library of Munich, Germany.
    11. Zdravka Todorova, 2013. "Connecting social provisioning and functional finance in a post-Keynesian–Institutional analysis of the public sector," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 10(1), pages 61-75.
    12. John Henry, 2007. "“Bad” Decisions, Poverty, and Economic Theory: The Individualist and Social Perspectives in Light of “The American Myth”," Forum for Social Economics, Taylor & Francis Journals, vol. 36(1), pages 17-27, January.
    13. Giorgos Argitis, 2011. "A view on post-Keynesian interest rate policy," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 8(1), pages 91-112.
    14. Vipul Bhatt & Andre R. Neveu, 2019. "Re-Thinking Debt Burden: Going with the Flow?," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 45(2), pages 179-203, April.
    15. Georgios Argitis & Stella Michopoulou, 2011. "Are Full Employment and Social Cohesion Possible Under Financialization?," Forum for Social Economics, Taylor & Francis Journals, vol. 40(2), pages 139-155, January.
    16. Hanan Aboel Farag & Mohamed Sayed Abed, 2017. "The Impact of Foreign Capital Inflows on Economic Growth and Employment in Egypt: A Sectoral Empirical Analysis," Working Papers 1152, Economic Research Forum, revised 11 Sep 2003.
    17. José Luis Rey Pérez, 2018. "¿Cómo garantizar el derecho al trabajo? La alterantiva de la renta básica," Revista de Economia Critica, Asociacion de Economia Critica, vol. 26, pages 51-65.
    18. Timothy Sharpe & Martin Watts, 2013. "Unconventional Monetary Policy in the UK: A Modern Money Critique," Economic Issues Journal Articles, Economic Issues, vol. 18(2), pages 41-64, September.
    19. Standing Guy, 2012. "Why a Basic Income Is Necessary for a Right to Work," Basic Income Studies, De Gruyter, vol. 7(2), pages 19-40, January.
    20. Engin Oner, 2015. "Comparative Interpretation of Classical and Keynesian Fiscal Policies (Assumptions, Principles and Primary Opinions)," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 4(2), pages 11-20, April.

    More about this item

    Keywords

    Fiscal Policy; Functional Finance; Modern Monetary Theory; Monetary Policy; Public Debt Sustainability; Zero Interest Rates;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lev:wrkpap:wp_843. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Elizabeth Dunn (email available below). General contact details of provider: http://www.levyinstitute.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.