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Debt, Deficits and Inflation: An Application to the Public Finances of India

Willem Buiter and Urjit R. Patel

No 3287, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The paper studies the solvency of the Indian public sector and the eventual monetization and inflation implied by stabilization of the debt-GNP ratio without any changes in the primary deficit. The nonstationarity of the discounted public debt suggests that indefinite continuation of the pattern of behavior reflected in the historical discounted debt process is inconsistent with the maintenance of solvency. This message is reinforced by the recent behavior of the debt-GNP ratio and the ratio of primary surplus plus seigniorage to GNP. Our estimates of the base money demand function suggest that even maximal use of seigniorage will not be sufficient to restore solvency.

Date: 1990-03
Note: ITI ME IFM
References: View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published as Journal of Public Economics, Vol. 47, pp. 171-205, (1992).

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Related works:
Journal Article: Debt, deficits, and inflation: An application to the public finances of India (1992) Downloads
Working Paper: Debt, Deficits and Inflation: An Application to the Public Finance of India (1990) Downloads
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