
Why do governments end up with debt ? Short-run effects matter
Desbonnet, Audrey; Weitzenblum, Thomas (2012), Why do governments end up with debt ? Short-run effects matter, Economic Inquiry, 50, 4, p. 905-919. http://dx.doi.org/10.1111/j.1465-7295.2011.00410.x
Voir/Ouvrir
Type
Article accepté pour publication ou publiéDate
2012Nom de la revue
Economic InquiryVolume
50Numéro
4Éditeur
Wiley
Pages
905-919
Identifiant publication
Métadonnées
Afficher la notice complèteRésumé (EN)
This paper reconsiders the impact of public debt in an economy with heterogeneous households and incomplete markets to emphasize the short-run effects of an increase in public debt. As compared to models that rest on steady-state analysis, we show that the welfare gains of a public debt increase are substantially higher when transitional dynamics are accounted for. The additional debt issue allows for a temporary reduction in the income tax rate, which stimulates labor supply and generates an overshooting of the interest rate. The short-run gains create a temptation to deviate toward higher levels of debt. Debt increases continue to generate welfare gains even when debt is considerably higher than its long-run optimal level.Mots-clés
Public debt; Government PolicyPublications associées
Affichage des éléments liés par titre et auteur.
-
Desbonnet, Audrey; Kankanamge, Sumudu (2017) Article accepté pour publication ou publié
-
Bessec, Marie; Desbonnet, Audrey; Kankanamge, Sumudu; Weitzenblum, Thomas (2012) Article accepté pour publication ou publié
-
Gignoux, Jérémie; Menéndez, Marta (2014-08) Communication / Conférence
-
Bessec, Marie; Fouquau, Julien (2018) Article accepté pour publication ou publié
-
Schad, Iven; Schmitter, Petra; Neef, Andreas; Lamers, Marc; Nguyen, La; Hilger, Thomas; Hoffmann, Volker; Saint-Macary, Camille (2012-06) Article accepté pour publication ou publié