Public-Debt Sustainability, Real Exchange Rate, and Country-Specific Saving Rates

Karl Farmer ()

International Advances in Economic Research, 2011, vol. 17, issue 1, 45-65

Abstract: The recent euro crisis has caused concerns both with respect to public-debt sustainability and the stability of exchange rates of highly indebted countries. This paper investigates these concerns in a two-country OLG model of the world economy with country-specific saving rates to mimic Asian economies. It is found that the concerns with respect to debt-sustainability are warranted since limits for public debt levels do exist. The concerns regarding exchange-rate stability are not warranted since unilateral debt expansion does not impact the real exchange at all, or the impacts are independent of the external balance of the debt-expanding country. Copyright International Atlantic Economic Society 2011

Keywords: Sustainability; Public debt; Real exchange rate; Two-country OLG model; H63; F41 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1007/s11294-010-9284-x (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:iaecre:v:17:y:2011:i:1:p:45-65:10.1007/s11294-010-9284-x

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/11294

DOI: 10.1007/s11294-010-9284-x

Access Statistics for this article

International Advances in Economic Research is currently edited by Katherine S. Virgo

More articles in International Advances in Economic Research from Springer, International Atlantic Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().