Public Debt and the Dynamics of Economic Growth

Greiner A. Public Debt and the Dynamics of Economic Growth. ANNALS OF ECONOMICS AND FINANCE. 2014;15(1):185-204.We analyze the effects of public debt on economic growth and its dynamics in a basic endogenous growth assuming that the history of debt affects the primary surplus of the government. The economy with a balanced government budget is characterized by a unique balanced growth path and a condition for saddle point stability is derived. With permanent public deficits there is either no balanced growth path, a unique balanced growth path or there exist two balanced growth paths. The balanced growth path is either stable or unstable. Further, the system may undergo a Hopf bifurcation leading to stable limit cycles