Government deficits in large open economies : the problem of too little public debt

Willem H. Buiter and Anne C. Sibert

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.

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Year of publication:	2015
Authors:	Buiter, Willem H. ; Sibert, Anne C.
Publisher:	Kiel : Kiel Inst. for the World Economy
Subject:	fiscal policy \| international policy coordination \| optimal taxation \| Finanzpolitik \| Fiscal policy \| Optimale Besteuerung \| Optimal taxation \| Öffentliche Schulden \| Public debt \| Theorie \| Theory \| Offene Volkswirtschaft \| Open economy \| Internationale Wirtschaftspolitik \| International economic policy \| Steuerpolitik \| Tax policy \| Haushaltsdefizit \| Budget deficit