Corruption and Public Debt

Maksym Ivanyna, Alex Mourmouras and Peter Rangazas
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Maksym Ivanyna: Joint Vienna Institute
Alex Mourmouras: IMF

Chapter Chapter 7 in The Macroeconomics of Corruption, 2021, pp 221-248 from Springer

Abstract: Abstract Chapter 5 shows how particular economic fundamentals and interest group politics are driving the formation of large fiscal gaps. Here, we stress that corruption is also an important determinant of the fiscal gap in many developed countries. We first introduce corruption and debt in the two-period model of government investment, using the generational interpretation. The model highlights the connection between corruption and government debt when the altruism toward future generations is sufficiently low. Next, we move to a more complete analysis using the overlapping-generations growth model. This section extends the quantitative theory from Chap. 6 that studied how the presence of corruption and tax evasion affects the formation of a country’s fiscal policy, by including public debt as a fiscal instrument.

Date: 2021
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DOI: 10.1007/978-3-030-67557-8_7

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