Public debt and aggregate stability with endogenous growth and a state-dependent consumption tax

Greiner A, Bondarev A (2014) Working Papers in Economics and Management; 02-2014.
Bielefeld: Bielefeld University, Department of Business Administration and Economics.

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Abstract
We analyze how different budgetary rules affect the stability of an economy in a basic endogenous growth model with public debt and a state-dependent consumption tax rate. We show that a discretionary policy implies that the government violates its inter-temporal budget constraint along a balanced growth path, whereas a balanced budget rule guarantees that the economy is stable. A rule based debt policy gives rise to stability if the reaction of the primary surplus to higher public debt is sufficiently large. Further, in case of a strongly regressive consumption tax rate over a certain range, multiple balanced growth paths may emerge. The main results can be generalized to hold for any endogenous growth model with infinitely lived households.
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Greiner A, Bondarev A. Public debt and aggregate stability with endogenous growth and a state-dependent consumption tax. Working Papers in Economics and Management. Vol 02-2014. Bielefeld: Bielefeld University, Department of Business Administration and Economics; 2014.
Greiner, A., & Bondarev, A. (2014). Public debt and aggregate stability with endogenous growth and a state-dependent consumption tax (Working Papers in Economics and Management, 02-2014). Bielefeld: Bielefeld University, Department of Business Administration and Economics. doi:10.4119/unibi/2915478
Greiner, A., and Bondarev, A. (2014). Public debt and aggregate stability with endogenous growth and a state-dependent consumption tax. Working Papers in Economics and Management, 02-2014, Bielefeld: Bielefeld University, Department of Business Administration and Economics.
Greiner, A., & Bondarev, A., 2014. Public debt and aggregate stability with endogenous growth and a state-dependent consumption tax, Working Papers in Economics and Management, no.02-2014, Bielefeld: Bielefeld University, Department of Business Administration and Economics.
A. Greiner and A. Bondarev, Public debt and aggregate stability with endogenous growth and a state-dependent consumption tax, Working Papers in Economics and Management, vol. 02-2014, Bielefeld: Bielefeld University, Department of Business Administration and Economics, 2014.
Greiner, A., Bondarev, A.: Public debt and aggregate stability with endogenous growth and a state-dependent consumption tax. Working Papers in Economics and Management, 02-2014. Bielefeld University, Department of Business Administration and Economics, Bielefeld (2014).
Greiner, Alfred, and Bondarev, Anton. Public debt and aggregate stability with endogenous growth and a state-dependent consumption tax. Bielefeld: Bielefeld University, Department of Business Administration and Economics, 2014. Working Papers in Economics and Management. 02-2014.
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