Death, Birth, Productivity Growth and Debt Neutrality

Willem Buiter

Economic Journal, 1988, vol. 98, issue 391, 279-93

Abstract: This paper reconsiders the necessary and sufficient conditions for debt neutrality. There is debt neutrality if, given a pro gram for public expenditure on current goods and services over time, the real equilibrium of the economy is not affected by a change in th e pattern of lump-sum taxes over time. If there is debt neutrality fo r instance, the substitution of borrowing today for lump-sum taxation today (followed by such further changes in the time path of future l ump-sum taxes as are required for maintaining government solvency) do es not affect the current and future behavior of private consumption and capital formation. Copyright 1988 by Royal Economic Society.

Date: 1988
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