In a recent paper, Minea and Villieu (2009) assert that the 'golden rule of public finance' implies a lower growth rate than the balanced-budget rule. Their contribution is misleading because it is not the 'golden rule of public finance' that generates their result but rather the fact that...

In this paper we study the basic endogenous growth model with externalities of capital and elastic labour supply and analyze how budget rules affect stability of the economy. The government levies an income tax with a constant rate and finances public expenditures which are neither productive...

In this note we work out the mechanism that makes public debt affect the allocation of resources in the long-run. To do so we analyze an AK growth model with elastic labour supply and a government sector. The government levies a distortionary income tax and issues bonds to finance both lump-sum...

This paper starts from the observation that the primary surplus of the government must be financed out of a country's GDP. Assuming that the interest rate on public debt exceeds the growth rate of GDP, it is demonstrated that a sustainable debt policy is not compatible with a rising public debt...

In this paper we analyze a descriptive endogenous growth model with public debt. The government can run into debt, but, the primary surplus is a positive function of the debt to GDP ratio such that the debt ratio becomes a mean-reverting process. We show that a balanced budget scenario yields a...

With this paper our objective is to study the effects of different deficit policies in an endogenous growth model with publicly funded human capital accumulation and public debt, where we allow for heterogeneous households. Two types of households are considered. One household acquires human...

Given the weak economic performance of many countries since the recent crisis, there is an increasing need for structural reforms aimed at promoting long-run economic growth. Structural reforms can entail short-run output costs unless offset by a demand expansion. When monetary policy is...

In this paper we analyze an endogeneous growth model with human capital that results from public educational spending. We allow for public debt and analyze three different debt policies: a balanced government budget, a slight deficit policy where debt grows but less than GDP, and a strong...

The paper presents and estimates an endogenous growth model with public capital. In contrast, however, to recent studies on economic growth and policy, we allow for capital market borrowing by the government. Since the behavior by the government (tax rates, spending and borrowing) does not...

We present a monetary endogenous growth model and analyze the effects of fiscal and monetary policy with real money as an argument in the utility function. We show that a balanced government budget gives a higher balanced growth rate and lower inflation than a situation with permanent public...