In this paper, we examine the effects of introducing constraints on government borrowing using a continuous-time overlapping generations model of a small open economy. We consider government placing constraints on the amount of government bonds outstanding by establishing an upper limit, or...

This paper investigates the equilibrium dynamics of an economy where two production technologies are available: One is a primitive production technology which realizes constant returns to scale, and the other is an advanced technology, which exhibits increasing returns to scale due to...