Notes on Optimal Debt Management

Consider the finance of an exogenous path of public expenditure, G(t),with taxes and public debt issues. In the absence of unexpected default,borrowing does not allow the government to escape taxes in a present-valuesense. But the choices of how much to borrow and in what form affect the timing of tax collections and the ways in…

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Public Debt and the Pasinetti Paradox

The Cambridge Theorem states that on a long run, equilibrium path, the rate of profits is equal to the natural rate of growth divided by the capitalists propensity to save. Public Debt and the Pasinet… by Debt Free on Scribd

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The Sustainability of Public Debt in Europe

The issue of budget discipline has always been crucial for European Monetary Union as itconcerns both the functioning of EMU in stage 3 and the qualification to access it (Bini-Smaghi,Padoa-Schioppa, Papadia 1994). Yet, the purpose of the fiscal criteria is not uncontentious. Thestumbling-bloc is not so much the objective of avoiding “excessive deficits”, but rather…

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Does euro area membership affect the relationbetween GDP growth and public debt?

We analyse the relationship between the debt to GDP ratio and real per capi-ta GDP growth for the euro area members by distinguishing between periods of sus-tainable and non-sustainable debt. Thresholds are theory-based and depend on the macroeconomic framework. If the interest rate exceeds nominal output growth, pri-mary budget surpluses are required to achieve a…

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