Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/72550
Authors: 
Azizi, Karim
Canry, Nicolas
Chatelain, Jean-Bernard
Tinel, Bruno
Year of Publication: 
29-Apr-2013
Abstract: 
This paper investigates the relevance of the No-Ponzi game condition for public debt (i.e. the public debt growth rate has to be lower than the real interest rate, a necessary assumption for Ricardian equivalence) and of the transversality condition for the GDP growth rate (i.e. the GDP growth rate has to be lower than the real interest rate). First, on the unbalanced panel of 21 countries from 1961 to 2010 available in OECD database, those two conditions were simultaneously validated only for 29% of the cases under examination. Second, those two conditions were more frequent in the 1980s and the 1990s when monetary policies were more restrictive. Third, in tune with the Keynesian view, when the real interest rate is higher than the GDP growth, it corresponds to 75% of the cases of the increases of the debt/GDP ratio but to only 43% of the cases of the decreases of the debt/GDP ratio (fiscal consolidations).
Subjects: 
Government solvency
Austerity
Fiscal consolidation
No-Ponzi game condition
transversality condition
budgetary policy
monetary policy
economic growth
JEL: 
E43
E5
E6
H6
O4
Document Type: 
Preprint

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