Journal
MACROECONOMIC DYNAMICS
Volume 17, Issue 4, Pages 947-954Publisher
CAMBRIDGE UNIV PRESS
DOI: 10.1017/S1365100511000642
Keywords
Deficit; Public Investment; Public Debt; Endogenous Growth; Multiplicity
Categories
Ask authors/readers for more resources
In a very interesting endogenous growth model, Futagami, Iwaisako, and Ohdoi [Macroeconomic Dynamics 12 (2008), 445-462] study the long-run growth effect of borrowing for public investment. Their model exhibits (i) the multiplicity of balanced growth paths (BGPs) in the long run (two steady states) and (ii) a possible indeterminacy of the transition path to the high-growth BGP. The goal of this note is to show that their results depend on a sharp assumption, namely the definition of the public debt target as a ratio to private capital. If the target is defined in terms of public debt-to-GDP ratio, both results vanish: the model exhibits a unique BGP (no multiplicity) and the adjustment path to this unique equilibrium is determinate (no indeterminacy).
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available