Many governments have a long-run target of lowering budget deficits in the future through current deficit spending, relying on economic growth to deliver their policy objective. This paper shows that this is unattainable under bond finance, since there exists no stable equilibrium. However, it is shown that a sustainable growth equilibrium is possible, but only if the deficit is treasury bill financed.
|Number of pages||5|
|Journal||Applied Economics Letters|
|Publication status||Published - 2000|