Is Government Debt a Vamp? 
Public Finance in a Transylvanian Growth Model

Mardi | 2015-09-22
Sully 5 de 16h à 17h20

Patrick VILLIEU – Maxime MENUET

The vampire metaphor has been used in numerous papers describing biological interactions between two populations. Such a metaphor translates well to a standard endogenous growth model with public debt. Public debt can be assimilated to a Vamp, whose blood-sucking behavior corresponds to the harmful effect of the debt burden on productive public expenditures. However, the complete destruction of public debt in the long-run is shown to be socially undesirable, because this would imply too much distortionary taxation, with damaging effects on the balanced growth path. By identifying ecological or biological processes with usual national account relationships, this analysis is one step further in the integration of macroeconomics and environmental economics.