The dynamics of bond versus treasury bill deficit financing

S Gazioglu, W D McCausland

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)219-223
Number of pages5
JournalApplied Economics Letters
Volume7
Publication statusPublished - 2000

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