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Public debt and aggregate stability with endogenous growth and a state-dependent consumption tax

Greiner Alfred () and Anton Bondarev ()
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Greiner Alfred: Bielefeld University

Economics Bulletin, 2015, vol. 35, issue 4, 2601-2609

Abstract: We analyze a basic endogenous growth model with public debt and a state-dependent consumption tax rate. We show that the balanced budget rule guarantees that the long-run growth path of the economy is unique and saddle point stable unless the tax rate is strongly regressive. In case of a strongly regressive consumption tax rate over a certain range, multiple balanced growth paths and local indeterminacy can arise.

Keywords: Balanced budget; public debt; stability; endogenous growth (search for similar items in EconPapers)
JEL-codes: E6 H6 (search for similar items in EconPapers)
Date: 2015-12-13
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