Debt Non-Neutrality, Policy Interactions, and Macroeconomic Stability

Arbeitspapier

We study the consequences of non-neutrality of government debt for macroeconomic stabilization policy in an environment where prices are sticky. Assuming transaction services of government bonds, Ricardian equivalence fails because public debt has a negative impact on its marginal rate of return and thus on private savings. Stability of equilibrium sequences requires a stationary evolution of real public debt, which steers inflation expectations and rules out endogenous fluctuations. Under anti-inflationary monetary policy regimes, macroeconomic fluctuations tend to decrease with the share of tax financing, which justifies tight debt constraints. In particular, a balanced budget policy stabilizes the economy under cost-push shocks, such that output and inflation variances can be lower than in a corresponding case where debt is neutral.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Tinbergen Institute Discussion Paper ; No. 05-077/2

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Business Fluctuations; Cycles ; Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy ; Monetary Policy
• Thema: Government debt ; fiscal and monetary policy rules ; stabilization policy ; equilibrium uniqueness ; Öffentliche Schulden ; Finanzpolitik ; Geldpolitik ; Regelbindung ; Konjunkturpolitik ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Linnemann, Ludger ; Schabert, Andreas
• Ereignis: Veröffentlichung
• (wer): Tinbergen Institute
• (wo): Amsterdam and Rotterdam
• (wann): 2005

Weitere Informationen

• Handle: http://hdl.handle.net/10419/86351
• Letzte Aktualisierung: 10.03.2025, 11:41 MEZ