Dynamic analysis of reductions in public debt in an endogenous growth model with public capital

Noritaka Maebayashi (), Takeo Hori () and Koichi Futagami
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Noritaka Maebayashi: Graduate School of Economics, Osaka University
Takeo Hori: College of Economics, Aoyama Gakuin University

No 12-08-Rev, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: We construct an endogenous growth model with productive public capital and government debts where government debts are gradually adjusted to target level. We examine how debt-reductions of the government affect the transitional dynamics and welfare of the economy. Fiscal consolidation has contractionary effects on economy in the short run, whereas it has positive long run effects on the growth of key macroeconomic variables. Reductions in the government debts at the expense of public spending improves social welfare. Importantly, as the size of debt-reductions is larger and as the government reduces its debts at a higher speed, the welfare improves more.

Keywords: Fiscal consolidation; Debt policy rule; Public capital; Welfare; Endogenous growth (search for similar items in EconPapers)
JEL-codes: E62 H54 H63 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2012-04, Revised 2013-02
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: DYNAMIC ANALYSIS OF REDUCTIONS IN PUBLIC DEBT IN AN ENDOGENOUS GROWTH MODEL WITH PUBLIC CAPITAL (2017)
Working Paper: Dynamic analysis of reductions in public debt in an endogenous growth model with public capital (2015)
Working Paper: Dynamic analysis of reductions in public debt in an endogenous growth model with public capital (2014)
Working Paper: Dynamic analysis of reductions in public debt in an endogenous growth model with public capital (2012)
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