A Closed‐form Solution for Determining the Burden of Public Debt in Neoclassical Growth Models

Dedák, István; Dombi, Ákos

doi:10.1111/boer.12125

Cited by 5 publications

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References 13 publications

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“…Private investment will experience some crowding out. The severe suppression of personal investment in the framework of elegant growth theories by debt levels [8]. Considering the safety, banks prefer government financing.…”

Section: Negative Effects Of Public Debt On Economic Growthmentioning

confidence: 99%

The Impact of Public Debt on Economic Growth

Fan

2024

HBEM

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One of the main areas of inquiry nowadays is how government debt influences the growth of the economy. Researchers have come to different conclusions regarding the manner in which public debt consequences growth in the economy. As a result, this essay examines how public debt affects an economy or a group of economies' ability to grow. The paper examines the effect of the federal debt on commercial growth by compiling and evaluating relevant research from 2018 to 2023. Threshold is a crucial piece of reference information for examining the process by which public debt has influenced expansion in the economy. The objective is to evaluate the consequence of debt incurred by governments on the development of the economy, determining whether it is favorable or adverse. If the ratio of debt to GDP falls below a certain threshold, it indicates that the public economy is positively contributing to economic growth. A higher threshold value also suggests that the economy can handle additional public responsibilities, increasing the likelihood of popular support for economic expansion. This implies that there exists a complex and nonlinear relationship.

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Section: Negative Effects Of Public Debt On Economic Growthmentioning

confidence: 99%

The Impact of Public Debt on Economic Growth

Fan

2024

HBEM

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Pension reforms in Hungary: have they gone too far?

Dedák,

Fiser

2024

Journal of Pension Economics and Finance

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As a result of unfavorable demographic processes, the pension systems in the Central and Eastern European (CEE) EU countries face significant challenges, which has made the implementation of reforms inevitable in the last decade. Relying on economic theory, this paper analyses the effects of the Hungarian pension reforms in comparison with those of other CEE countries, and discusses the consequences from the point of view of social policy and the sustainability of the pension schemes. We explore the reasons why the reforms in Hungary ultimately did not improve sustainability but rather contributed to dismantling the social care system. Therefore, the Hungarian case provides useful lessons for other countries, and at the same time underlines the importance of automatic adjustment mechanisms. The study pays particular attention to the theoretical analysis of pension indexation because its accurate quantitative effects are far from being sufficiently clarified in the literature, although it is vital for a thoughtful evaluation of pension reforms.

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Public debt and economic growth: what do neoclassical growth models teach us?

Dombi

Dedák

2018

Applied Economics

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This paper aims to quantify the crowding-out effect of public debt and the related loss in longrun output in neoclassical growth models. To accomplish this task, we incorporate the government sector into the Ramsey-Cass-Koopmans (RCK) model, the Blanchard model and the Solow model, which differ only in their assumptions concerning the consumption behaviour of households. We also introduce a general framework that is capable of gauging the burden of public debt in a neoclassical world in the case of any type of consumption behaviour. Our results are threefold. First, contrary to the RCK model, public debt reduces long-run output in the Blanchard model and the Solow model, although to a different extent: the crowding-out effect is marginal in the former, whereas it can be very large in the latter. Second, the burden of public debt is country-specific depending crucially on the saving rate and the population growth rate. Finally, in developed countries the upper limit of the output loss related to public debt is moderate at best even if distortionary taxes are taken into account.

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A Closed‐form Solution for Determining the Burden of Public Debt in Neoclassical Growth Models

Cited by 5 publications

References 13 publications

The Impact of Public Debt on Economic Growth

The Impact of Public Debt on Economic Growth

Pension reforms in Hungary: have they gone too far?

Public debt and economic growth: what do neoclassical growth models teach us?

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