2013/04/27 by Karim Azizi, Nicolas Canry, Azizi, Karim +5
Economics, Econometrics and Finance · #62 #91 #Economic Theory and Policy #FOS: Economics and business #Fiscal Policies and Political Economy #Fiscal Policy and Economic Growth #General Finance (q-fin.GN) #J.4
paper · pdf · doi:10.48550/arxiv.1304.7330
openalex publication_date 2013/04/27 · openalex created_date 2021/02/01 · openalex updated_date 2026/07/28
This paper investigates the relevance of the No-Ponzi game condition for\npublic debt (i.e. the public debt growth rate has to be lower than the real\ninterest rate, a necessary assumption for Ricardian equivalence) and of the\ntransversality condition for the GDP growth rate (i.e. the GDP growth rate has\nto be lower than the real interest rate). First, on the unbalanced panel of 21\ncountries from 1961 to 2010 available in OECD database, those two conditions\nwere simultaneously validated only for 29% of the cases under examination.\nSecond, those two conditions were more frequent in the 1980s and the 1990s when\nmonetary policies were more restrictive. Third, in tune with the Keynesian\nview, when the real interest rate is higher than the GDP growth, it corresponds\nto 75% of the cases of the increases of the debt/GDP ratio but to only 43% of\nthe cases of the decreases of the debt/GDP ratio (fiscal consolidations).\n