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  • Open Daily: 10am - 10pm
    Alley-side Pickup: 10am - 7pm

    3038 Hennepin Ave Minneapolis, MN
    612-822-4611

Open Daily: 10am - 10pm | Alley-side Pickup: 10am - 7pm
3038 Hennepin Ave Minneapolis, MN
612-822-4611
Sustainability and Optimality of Public Debt

Sustainability and Optimality of Public Debt

Carlberg, Michael
Hansen, Arne

Paperback

EconomicsInvesting & Finance

ISBN10: 3642446302
ISBN13: 9783642446306
Publisher: Physica-Verlag
Published: Jan 29 2015
Pages: 212
Weight: 0.78
Height: 0.52 Width: 6.14 Depth: 9.21
Language: English
This book studies the sustainability and optimality of public debt under different scenarios: the closed economy, the small open economy, and a two-country setting. Sustainability refers to the existence and the stability of the long-run equilibrium. Optimality relates to the path of public debt that maximizes discounted utility. The analysis is conducted within the framework of the Solow model, the overlapping generations model and the infinite horizon model. The government can follow different strategies, it either fixes the deficit ratio or the tax rate. As a result, a fixed deficit ratio generally can be sustained. By contrast, a fixed tax rate generally cannot be sustained. Depending on the chosen fiscal strategy, there exists either an optimal deficit ratio or an optimal tax rate that maximizes the sum of consumption and government purchases per capita.

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