Keywords: Government debt, Ricardian equivalence
Abstract: This paper surveys the literature on the macroeconomic effects of
government debt. It begins by discussing the data on debt and
including the historical time series, measurement issues, and
projections of future fiscal policy. The paper then presents the
conventional theory of government debt, which emphasizes aggregate
demand in the short run and crowding out in the long run. It next
examines the theoretical and empirical debate over the theory of debt
neutrality called Ricardian equivalence. Finally, the paper considers
the various normative perspectives about how the government should use
its ability to borrow.
Full paper (181 KB PDF)
| Full paper (351 KB Postscript)
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Last update: March 3, 1998