Demand-led growth with debt constraints

Graham White

No 2008-01, Working Papers from University of Sydney, School of Economics

Abstract: The paper explores the implications of different autonomous demands, with differing rates of growth, in a demand-led growth model where policy makers are concerned about the ratios of public sector debt to income and external debt to income. The actual growth rate is explained in terms of the growth rate of aggregate demand, with emphasis in the formation of expectations about growth in the latter; and the relative importance in this regard of realised aggregate demand growth and autonomous demand growth, the latter being governed by export demand and public sector expenditure. Debt constraints - specifically, the ratio of public sector debt to output and the ratio of external debt to output - become relevant in the determination of the growth rate of government expenditure. The paper explores the likely interactions between debt constraints, the growth rate of aggregate demand and autonomous demand by means of dynamic simulations.

Keywords: government expenditure; debt; Autonomous demand; growth (search for similar items in EconPapers)
Date: 2008-12
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Persistent link: https://EconPapers.repec.org/RePEc:syd:wpaper:2123/7068

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