Optimal saving and sustainable foreign debt

Delano Villanueva and Roberto Mariano

Philippine Review of Economics, 2020, vol. 57, issue 2, 170-199

Abstract: This paper develops and discusses an open-economy growth model in a modi!ed Arrow learning-by-doing framework, in which workers learn through experience on the job, thereby increasing their productivity. Applying optimal control to maximize the discounted stream of intertemporal consumption, the model yields domestic saving rates of 18-22 percent of GDP, which are feasible targets in developing and emerging market economies. Sustainable gross foreign debt is in the range of 39-50 percent of GDP. Saving, debt, and growth policies are suggested.

Keywords: Neoclassical growth; open economy; learning-by-doing; optimal control; growth policies (search for similar items in EconPapers)
JEL-codes: E13 O41 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:phs:prejrn:v:57:y:2020:i:2:p:170-199

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