On Public Debts, Fiscal Deficits, and the Maastricht Rules

Vito Tanzi

Chapter 7 in Dollars, Euros, and Debt, 2013, pp 63-69 from Palgrave Macmillan

Abstract: Abstract An empirical study co-authored by the author of this book — written for a seminar on public debt and fiscal policy in EMU, held at the European Commission in Brussels on 17 September 1999 at a time when EMU had just become official — concluded that: “A growing public debt appears to lead to higher direct taxes, lower public investment and, ultimately, a lower growth rate. In addition, higher debt does seem to crowd out private capital formation and raise interest rates.” It added, “[E]vidence for the EU suggests that it is possible [that] lower debt will have non-negligible [positive] effects on growth rates…” Therefore, “[T]he welfare impact over time of lowering public debt could be large” (see Tanzi and Chalk, 2000, p. 41). The conclusions of that study were ignored at the time they were presented and for several years afterwards, even by economists interested in the topic. Only many years later, when public debt started to attract attention, were those conclusions endorsed or challenged by various studies that had consistently failed to cite it.

Keywords: Public Debt; Public Spending; Debt Ratio; Maastricht Treaty; High Debt (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-34647-6_7

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DOI: 10.1057/9781137346476_7

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