Citation

Discussion Paper Details

Please find the details for DP6897 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: A Comparison of Debt and Primary-deficit Constraints

Author(s): Roel Beetsma, Marcos Poplawski Ribeiro and Andreas Schabert

Publication Date: July 2008

Keyword(s): fiscal constraints, myopia, social welfare and Stability and Growth Pact

Programme Area(s): International Macroeconomics

Abstract: This paper compares constraints on the public debt with constraints on the primary deficit. The analysis takes into account how an optimizing government reacts to the different constraints when deciding on a spending and borrowing plan. We find that the economy behaves similarly under both constraints, although for our benchmark calibration welfare is higher under the debt constraint. Further, the debt constraint is more robust against changes in the interest rate. Our results lend support to the enhanced focus on the public debt after the recent reform of the Stability and Growth Pact.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6897

Bibliographic Reference

Beetsma, R, Ribeiro, M and Schabert, A. 2008. 'A Comparison of Debt and Primary-deficit Constraints'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6897