A Note on the Long-run Effects of Bond Financed Government Expenditures

Dennis Glennon

Public Finance = Finances publiques, 1989, vol. 44, issue 3, 394-405

Abstract: In this paper, the authors develop a neoclassical growth model to test the impact of an increase in bond financed government expenditures on private spending. The key issue concerns the effect that an increase in government debt has on private spending under the assumption of both complete and partial discounting of future taxes. The existence of partial discounting will depend upon the public's ability to associate an increase in the government's debt with an attempt to optimally allocate tax payments and will have a significant impact on whether increases in nominal government debt crowd out or crowd in private capital formation.

Date: 1989
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Persistent link: https://EconPapers.repec.org/RePEc:pfi:pubfin:v:44:y:1989:i:3:p:394-405

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