| Title: | Persistent deficit, growth, and indeterminacy (2012) |
| Authors: | Alexandru Minea, Author ; Patrick Villieu, Author |
| In : | Macroeconomic Dynamics (Vol. 16 N°S2, September 2012) |
| Article on page: | pp. 267-283 |
| Languages: | English |
| Descriptors: |
[Eurovoc] ECONOMICS > economic conditions > economic development > economic growth [Eurovoc] FINANCE > public finance and budget policy > public debt [Eurovoc] FINANCE > taxation > fiscal policy |
| Tags: | deficit ; productive government spending ; endogenous growth ; nonlinear effects of fiscal policy ; public debt |
| Abstract: | In this paper, we look for long-run and short-run effects of fiscal deficits on economic growth in an endogenous growth model with productive public spending that may be financed by public deficit and debt. The model shows a multiplicity of long-run balanced growth paths (a high-growth and a low-growth steady state) and a possible indeterminacy of the transition path, which may be consistent with the empirical literature, which exhibits strong nonlinear responses of economic growth to fiscal deficits. Starting from the high-growth steady state, a positive impulse in the deficit ratio exerts an adverse effect on economic growth in the long run, after an initial rise. Starting from the low-growth steady state, the situation may be radically undetermined, and the effect of fiscal deficit impulses is subjected to “optimistic” or “pessimistic” views on public-debt sustainability. |
| Doi : |
Pubmed : 10.1017/S1365100511000435 
|
| Axe de recherche : | Financement du développement |
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