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Full-Text Articles in Social and Behavioral Sciences
Public Debt, Secular Stagnation, And Functional Finance, Peter Skott
Public Debt, Secular Stagnation, And Functional Finance, Peter Skott
Economics Department Working Paper Series
Fiscal policy and public debt may be required to maintain full employment and avoid secular stagnation. This conclusion emerges from a range of different models, including OLG specifications and stock-flow consistent (post-) Keynesian models. One of the determinants of the required long-run debt ratio is the rate of economic growth. Low growth leads to high debt, and empirical correlations between growth and debt may reflect this causal effect of growth on debt, rather than negative effects of debt on growth. A second result relates directly to austerity policies. The level of government consumption and the structure of taxation influence the …
Fiscal And Monetary Policy Rules In An Unstable Economy, Soon Ryoo, Peter Skott
Fiscal And Monetary Policy Rules In An Unstable Economy, Soon Ryoo, Peter Skott
Economics Department Working Paper Series
This paper examines the implications of different monetary and fiscal policy rules in an economy characterized by Harrodian instability. We show that (i) a monetary rule along Taylor lines can be stabilizing for low debt ratios but becomes de-stabilizing if the debt ratio exceeds a certain threshold, (ii) a `Keynesian' fiscal policy rule can stabilize the economy at full employment, (iii) a fiscal `austerity' rule that links fiscal parameters to deviations from a target debt ratio fails to adjust the `warranted' to the `natural' growth rate and destabilizes the warranted path, (iv) instability may arise from a combination of fiscal …