Journal Article

Public debt sustainability and alternative theories of interest

Tony Aspromourgos, Daniel Rees and Graham White

in Cambridge Journal of Economics

Published on behalf of Cambridge Political Economy Society

Volume 34, issue 3, pages 433-447
Published in print May 2010 | ISSN: 0309-166X
Published online April 2009 | e-ISSN: 1464-3545 | DOI: https://dx.doi.org/10.1093/cje/bep010
Public debt sustainability and alternative theories of interest

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  • National Budget, Deficit, and Debt
  • Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
  • Monetary Policy, Central Banking, and the Supply of Money and Credit
  • Money and Interest Rates

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This paper reappraises sustainable trajectories of public debt and fiscal balance, with particular reference to the possible relations between the interest rate on debt and the growth rate of the economy. From the standpoint of the approach to the theory of interest proposed by Keynes—and, in a certain sense, also by Sraffa—the analysis opens up the possibility of sustaining permanent primary budget deficits. However, the extent to which this standpoint enables one to revise the spectrum of feasible empirical magnitudes for sustainable fiscal balances appears rather modest.

Keywords: Sustainable fiscal balance; Keynes; Sraffa; E43; E58; E63; H63

Journal Article.  8146 words. 

Subjects: National Budget, Deficit, and Debt ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook ; Monetary Policy, Central Banking, and the Supply of Money and Credit ; Money and Interest Rates

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