Journal Article

No. 2016-2 | January 18, 2016
Government Deficits in Large Open Economies: The Problem of Too Little Public Debt PDF Icon

Abstract

Large and growing levels of public debt in the United States, United Kingdom, Japan and the Euro Area raise new interest in the cross-country effects of a large open economy’s deficits. The authors consider a dynamic optimising model with costly tax collection and exogenously given public spending and initial debt. They ask whether the externalities associated with an individual country’s deficits are positive or negative. They characterise the path of taxes in the Nash equilibrium where policy makers act nationalistically and compare this outcome to the global optimal outcome.

JEL Classification

E62 F42 H21

Citation

Willem H. Buiter and Anne C. Sibert (2016). Government Deficits in Large Open Economies: The Problem of Too Little Public Debt. Economics: The Open-Access, Open-Assessment E-Journal, 10 (2016-2): 1—39. http://dx.doi.org/10.5018/economics-ejournal.ja.2016-2

Assessment

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