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ARE FISCAL SUSTAINABILITY AND STABLE BALANCED GROWTH EQUILIBRIUM SIMULTANEOUSLY ATTAINABLE?
Author(s) -
Kamiguchi Akira,
Tamai Toshiki
Publication year - 2012
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.2011.04150.x
Subject(s) - economics , debt , gross domestic product , macroeconomics , fiscal sustainability , monetary economics , fiscal policy , sustainability , debt to gdp ratio , debt ratio , government debt , government (linguistics) , real gross domestic product , sustainable growth rate , internal debt , finance , ecology , linguistics , philosophy , biology
This paper presents an examination of the sustainability of national debt and economic growth, and the growth effects of government debt and income taxation. Results show sustainability of national debt and economic growth under the primary surplus rule. Fiscal policy and balanced growth are compatibly sustainable if and only if the government sets a long‐run target debt/GDP (gross domestic product) ratio within a reasonable range. Results also show that a rise in the long‐run debt/GDP ratio reduces the balanced growth rate. Based on these two results, the long‐run debt/GDP ratio is greater than zero if the government aims to maximize the balanced growth rate.