Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/174385
Authors: 
Skott, Peter
Year of Publication: 
2015
Series/Report no.: 
Working Paper, University of Massachusetts, Department of Economics 2015-12
Abstract: 
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 required debt ratio and, paradoxically, austerity policies are counterproductive on their own terms: cuts in government consumption lead to an increase in the required level of debt.
Subjects: 
functional finance
zero lower bound
liquidity trap
fiscal policy
secular stagnation
austerity
public debt
JEL: 
E62
E22
Document Type: 
Working Paper

Files in This Item:
File
Size
297.77 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.