Debt Revenue and the Sustainability of Public Debt

Ricardo Reis

Journal of Economic Perspectives, 2022, vol. 36, issue 4, 103-24

Abstract: While public debt has risen in the last two decades, the return that it offers to investors has fallen, especially relative to the return on private investment. This creates a revenue for the government as the supplier of the special services offered by public bonds, which include storage of value, safety, liquidity, and reprieve from repression. The present value of this debt revenue is large relative to the stock of public debt, keeping it sustainable even as the present value of primary balances is zero or negative. It gives rise to different policy tradeoffs than the conventional analysis of primary balances and makes different recommendation on the effects of austerity, the optimal amount of debt, or the spillovers between monetary and fiscal policy.

JEL-codes: E23 E52 E62 H61 H62 H63 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Debt Revenue and the Sustainability of Public Debt (2022)
Working Paper: Debt revenue and the sustainability of public debt (2022)
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DOI: 10.1257/jep.36.4.103

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