Sovereign debt and economic growth when government is myopic and self-interested

• 成果类型: Article
• 署名作者: Acharya, Viral V.; Rajan, Raghuram G.; Shim, Jack B.
• 署名单位: New York University; Center for Economic & Policy Research (CEPR); National Bureau of Economic Research; University of Chicago
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2024.103906
• 发表日期: 2024
• 关键词: Government myopia; Financial repression; Allocation puzzle; Growth trap; Growth boost; Debt ceiling

摘要

We examine how a sovereign's ability to borrow abroad affects the country's growth and steady-state consumption when the government is both myopic and self -interested. Surprisingly, government myopia can increase a country's access to external borrowing and extend the government's effective horizon, giving it a stake in incentivizing private production and savings despite its self-interest. In a high -saving country, the lengthening of the government's effective horizon can incentivize it to tax less, resulting in a growth boost, with higher steady-state household consumption than if it could not borrow abroad. However, in a country that saves little, the government may engage in repressive tax policies to channel domestic savings into government bonds. This increases future governments' costs of default, and in turn enhances current debt capacity and spending, but can lead to a growth trapwhere steady-state household consumption is lower than without government's access to external borrowing.