Debt Policy Rules in an Open Economy

Morimoto, Keiichi; Hori, Tetsuro; Maebayashi, Noritaka; Futagami, Koichi

doi:10.1111/jpet.12197

Cited by 15 publications

(17 citation statements)

References 26 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…20 Raines and Stockman (2010) and Stockman (2010) This paper can be extended in several directions. For example, it would be worthwhile to incorporate multiple production sectors (Meng, 2003;Meng & Velasco, 2004;Weder, 2001), and to consider government expenditure, public debt, and taxes (Huang et al, 2017;Koyunc & Turnovsky, 2016;Morimoto, Hori, Maebayashi & Futagami, 2017; Le Van et al, forthcoming). In addition, I can consider features that are commonly adopted in the new-Keynesian literature, such as price stickiness, wage rigidity, and investment adjustment costs, among others.…”

Section: Discussionmentioning

confidence: 99%

International bond risk premia, currency of denomination, and macroeconomic (in)stability

Chen

2018

J Public Economic Theory

View full text Add to dashboard Cite

I show that, in real small‐open as well as large‐open economies, international borrowing produces a destabilizing effect that significantly lowers the minimum level of increasing returns to scale needed for indeterminacy. In this case, a sufficiently high debt‐to‐capital ratio coefficient in the borrowing rate schedule operates like an automatic stabilizer that mitigates belief‐driven cyclical fluctuations. The analysis conducted within the monetary setting shows that both the benchmark nominal interest rate and the inflation rate of the country of the denominated currency may lessen the destabilizing effect of international borrowing. When domestic sunspot shocks exert sufficiently strong effects on these two variables, international borrowing may instead stabilize the domestic economy. I also find that inflation indexed bonds remove the stabilizing effect of the inflation rate of the country of the denominated currency and make different types of international bonds under different monetary regimes exhibit qualitatively the same destabilizing effect as real bonds in real economies. In addition, flexible inflation targeting performs no worse than rigid inflation targeting in all cases. Finally, the quantitative analysis undertaken shows that in the past few decades the considerable increase in foreign indebtedness may have destabilized the U.S. economy by giving rise to belief‐driven fluctuations.

show abstract

Section: Discussionmentioning

confidence: 99%

International bond risk premia, currency of denomination, and macroeconomic (in)stability

Chen

2018

J Public Economic Theory

View full text Add to dashboard Cite

show abstract

“…As in (23), the growth rate of C t is determined by the values of k g,t and n t . k g,t first falls and then rises, converging to the new steady-state level, which is higher than the initial steadystate level.…”

Section: Transitional Dynamicsmentioning

confidence: 99%

Dynamic analysis of budget policy rules in Japan

Futagami

Konishi

2018

Journal of the Japanese and International Economies

Self Cite

View full text Add to dashboard Cite

show abstract

“…Expenditure cuts, notably lower public investments, led to a reduction of public deficits. The debt reduction benchmark announced by the reform of the Stability and Growth Pact (SGP)(also called "Six-Pack") in December 2011 states that Member States whose current debt-to-GDP ratio is higher than the 60% threshold must curtail the distance to 60% by an average rate of one-twentieth per year (Morimoto et al, 2017). The reason for this is the thought that persistent budget deficits lead to problems for the economy and the government, especially due to the government's borrowing associated with a budget deficit that "crowds out" private investment spending and decreases long run growth of the economy.…”

Section: Introductionmentioning

confidence: 99%

“…Hence, it is crucial to analyze the sustainable debt policy rules in a model of an open economy (Morimoto et al, 2017). The literature states some results of the analysis of open economies.…”

Section: Introductionmentioning

confidence: 99%

Sustainable Debt Policy Rules and Growth in a Small Open Economy Model: Is a Balanced Government Budget Worthwhile?

Dascher

2020

Comp Econ Stud

View full text Add to dashboard Cite

In this paper our objective is to analyze sustainable debt policy rules and economic growth using a model of endogenous economic growth theory. For the government it is possible to run into debt, but, the primary surplus is a positive linear function of the debt-to-GDP ratio which guarantees that public debt is sustainable. We analyze different sustainable debt policies in this small open economy model of endogenous growth with public capital accumulation, as well we take transitions into account. We investigate the characteristics and stability of the steady state and we analyze the effects on welfare for the different debt policies. * I would like to thank Alfred Greiner and Christiane Clemens for the inspiring ideas and the support received in various meetings. I am indebted to António Afonso, Matthias Schön, Paolo Pasimeni and other participants for very competent and detailed comments during the INFER Workshop on New Challenges for Fiscal Policy which helped to improve the paper.

show abstract

Debt Policy Rules in an Open Economy

Cited by 15 publications

References 26 publications

International bond risk premia, currency of denomination, and macroeconomic (in)stability

International bond risk premia, currency of denomination, and macroeconomic (in)stability

Dynamic analysis of budget policy rules in Japan

Sustainable Debt Policy Rules and Growth in a Small Open Economy Model: Is a Balanced Government Budget Worthwhile?

Contact Info

Product

Resources

About