Interconnection of Fiscal Policies on Sustainability of Public Debt

Atsumasa Kondo ()
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Atsumasa Kondo: Faculty of Economics, Shiga University

No 20, Discussion Papers CRR Discussion Paper Series A: General from Shiga University, Faculty of Economics,Center for Risk Research

Abstract: This paper investigates the interconnection between certain fiscal policies in achieving a sustainable level of public debt. The fiscal policies that are investigated relate to the consumption tax rate, the income tax rate, and to public spending. The paper focuses on the critical level of public debt-to-GDP ratio, for which if the ratio exceeds this level at time 0, then it diverges to +∞ as time passes. The paper theoretically examines how the critical level depends on the fiscal policies, and reveals some merits of consumption taxation. As the consumption tax rate increases, so income taxation and cutting public spending become more effective in sustaining public debt.

Keywords: sustainability of public debt; fiscal policies; consumption tax; income tax; public spending; balanced growth path (search for similar items in EconPapers)
JEL-codes: E62 H6 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2016-09
New Economics Papers: this item is included in nep-mac, nep-pbe and nep-sog
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:shg:dpapea:20

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