Debt as a blessing: A capital screening mechanism

• 成果类型: Article
• 署名作者: Dong, Feng; Sargent, Thomas J.; Wang, Pengfei; Wang, Yizhen
• 署名单位: Tsinghua University; New York University; Peking University; Peking University Shenzhen Graduate School (PKU Shenzhen); Central University of Finance & Economics
• 刊物名称: PROCEEDINGS OF THE NATIONAL ACADEMY OF SCIENCES OF THE UNITED STATES OF AMERICA
• ISSN/ISSBN: 0027-8424; 1091-6490
• DOI: 10.1073/pnas.2602272123
• 发表日期: 2026-07-07
• 页码: e2602272123
• 关键词: Government debt; Heterogeneous agent; interest rate; growth rate

摘要

We challenge a recently popular view that a negative interest-growth rate gap (r < g) offers a free lunch for debt-financed government spending by formulating a model in which r and g are endogenous variables shaped by fiscal policy through its effects on equilibrium multiplicity and capital allocation. Observing r < g can signal that sustained government deficits have generated multiple steady states, and the economy has converged to a stable low-efficiency equilibrium. With its heterogeneous entrepreneurs, the model's real interest rate serves as a screening device for investment efficiency. Causation runs from the fiscal regime to equilibrium selection and outcomes: Fiscal surpluses eliminate equilibrium multiplicity and anchor expectations that sustain a unique, high-productivity equilibrium, thereby rationalizing Alexander Hamilton's characterization of debt as a blessing. Persistent deficits can push the economy into a misallocation trap characterized by scarce safe assets, low interest rates, survival of inefficient firms, depressed aggregate productivity, and self-validating low growth. Thus, costs of debt-financed fiscal deficits consist not only of deferred taxes, but also of permanently lower national productive capacity.