IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/97381.html
   My bibliography  Save this paper

Continuous time debt dynamics and fiscal policy for full-employment: A Keynesian approach by mathematics and simulation

Author

Listed:
  • Tanaka, Yasuhito

Abstract

We present a continuous time version of a dynamic analysis of debt-to-GDP ratio, and examine the effects of a fiscal policy which realizes full-employment from a state of under-employment or with deflationary GDP gap. We show that the larger the extra growth rate of real GDP by a fiscal policy is, the smaller the debt-to-GDP ratio at the time when full-employment is realized is, and a fiscal policy for full-employment can reduce the debt-to-GDP ratio. Therefore, full-employment can be realized by an aggressive fiscal policy with smaller debt-to-GDP ratio than before the fiscal policy. An increase in the government expenditure may induce a rise of the interest rate. Since the higher the interest rate is, the larger the debt-to-GDP ratio is, we need an appropriate monetary policy which maintains the low interest rate. Also we show that even if the propensity to consume is very small, an aggressive fiscal policy can realize full-employment without increasing debt-to-GDP ratio.

Suggested Citation

  • Tanaka, Yasuhito, 2019. "Continuous time debt dynamics and fiscal policy for full-employment: A Keynesian approach by mathematics and simulation," MPRA Paper 97381, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:97381
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/97381/9/MPRA_paper_97381.pdf
    File Function: original version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/97546/1/MPRA_paper_97546.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    fiscal policy; full-employment; debt-to-GDP ratio; continuous time debt dynamics;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

    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:pra:mprapa:97381. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.