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Soon Ryoo, Peter Skott (2011) Public debt and full employment in a stock-flow consistent model of a corporate economy, University of Massachusetts Amherst, Department of Economics, Working paper

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Abstract: This paper examines the fiscal requirements for continuous full employ- ment. We find that (i) changes in the financial behavior of households and Örms require adjustments in tax rates and public debt, (ii) the stability of the steady-state solution for public debt depends on the fiscal instrument and the household consumption function, (iii) in stable cases, a fall in gov- ernment consumption (or a decline in another component of autonomous demand) requires an increase in the steady-state ratio of public debt to capital, and (iv) the steady-state tax rate may be positively or negatively related to the level of debt.

Keywords: corporate economy, full employment, public debt, stock-{\’a}ow consistency

November 13, 2010 | Comments Closed