The Monetary-Fiscal Mix: Long-Run Implications

James Tobin

No 780, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: The long-run dynamics of public deficits and debt are modeled, assuming that public debt competes with capital for limited private savings. The interest costs of the debt are endogenously determined in this market, and the deficit in other budget transactions is a constant fraction of Gross National Product. Simulations with parameter values suggested by recent United States experience show the likelihood of unstable paths, along which debt grows faster than GNP indefinitely.

Keywords: Monetary-fiscal mix; public deficits; public debt (search for similar items in EconPapers)
Pages: 15 pages
Date: 1986-01
Note: CFP 645.
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Citations: View citations in EconPapers (8)

Published in AEA Papers and Proceedings (May 1986), 76(2): 213-218

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