The dynamics of bond versus treasury bill deficit financing

Saziy Gazioglu and W. David McCausland

Applied Economics Letters, 2000, vol. 7, issue 4, 219-223

Abstract: Many governments have a long-run target of lowering budget deficits in the future through current deficit spending, relying on economic growth to deliver their policy objective. This paper shows that this is unattainable under bond finance, since there exists no stable equilibrium. However, it is shown that a sustainable growth equilibrium is possible, but only if the deficit is treasury bill financed.

Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:7:y:2000:i:4:p:219-223

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DOI: 10.1080/135048500351546

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