Title

The Monetary-Fiscal Mix: Long-Run Implications

Authors

James Tobin

Document Type

Discussion Paper

Publication Date

1-1-1986

CFDP Number

780

CFDP Pages

15

Abstract

The long-run dynamics of public deficits and debt are modeled, assuming that public debt competes with capital for limited private savings. The interest costs of the debt are endogenously determined inthis market, and the deficit in other budget transactions is a constant fraction of Gross National Product. Simulations with parameter values suggested by recent United States experience show the likelihood of unstable paths, along which debt grows faster than GNP indefinitely.

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