Public Debt and Price Stability

Christian von Weizsäcker Carl
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Christian von Weizsäcker Carl: Max Planck Institute for Research on Collective Goods, Kurt-Schumacher-Straße 10, 53113Bonn, Germany

German Economic Review, 2014, vol. 15, issue 1, 42-61

Abstract: Modernized Austrian capital theory implies: in capital market equilibrium without public debt the average period of production equals the average waiting period of households. In the twenty-first century and for the OECD plus China area, demographic and production parameters are such that capital market equilibrium implies a negative real rate of interest. Price stability implies a non-negative real rate of interest. Prosperity requires capital market equilibrium. Thus, positive public debt is required for price stability under conditions of prosperity. Some conclusions are drawn for actual international macropolicy.

Keywords: Public debt; capital theory; saving behaviour; price stability; international macropolicy (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1111/geer.12030

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