By an endogenous growth model with two-period overlapping generations structure and money holding of consumers, we examine the existence of budget deficit in an economy which endogenously grows by investments of firms. The main results are as follows. (1) Budget deficit is necessary for full...

Using a traditional neoclassical two-period overlapping generations model that takes into account consumers’ money holdings, we examine the existence of budget deficit in an economy which grows at the constant positive rate. The following results will be shown. 1) Budget deficit is necessary...

This paper will argue that since the ratio of government debt to GDP cannot diverge to infinity, fiscal collapse is not possible. Using a macroeconomic model of a growing economy with a simple microeconomic foundation about consumers’ behavior, with overlapping generations model in mind, we...

This paper will argue that since the ratio of government debt to GDP cannot diverge to infinity, fiscal collapse is not possible. Using a basic macroeconomic model in which the interest rate of government bonds is endogenously determined, with overlapping generations model in mind, we show the...

The aim of the paper is to show, using a simple two-period overlapping generations model in which goods are produced solely by labour in a monopolistically competitive industry, that a continuous budget deficit (including the interest payments on government bonds) is necessary to achieve and...

One of the most commonly used conditions for examining fiscal stability is the Domar condition. It compares the interest rate with the economic growth rate under balanced budget (excluding interest payments), and if the former is greater than the latter, public finances will become unstable, and...

It is said that public finance must be balanced at least in the long run. According to the so-called MMT (Modern Money Theory or Modern Monetary Theory) approach, however, this is not true. It is often pointed out that MMT lacks the mathematical analysis used in ordinary economic discussions....

This paper will examine the relationship between budget deficit, inflation rate and debt to GDP ratio from the perspective of Functional Finance Theory and MMT (Modern Monetary Theory). Using a basic macroeconomic model in which the interest rate of government bonds is endogenously determined,...

This paper examines the relationship among budget deficit, inflation rate and debt to GDP ratio from the perspective of Functional Finance Theory and MMT (Modern Monetary Theory). Using an overlapping generations model under monopolistic competition with bequest motive of consumers, mainly we...