Does the 'Golden Rule of Public Finance' Imply a Lower Long-Run Growth Rate? A Clarification

Economics Bulletin, Vol. 30, No. 2, 2010

8 Pages Posted: 28 May 2009 Last revised: 30 Dec 2012

See all articles by Alfred Greiner

Alfred Greiner

Bielefeld University - Department of Business Administration and Economics

Date Written: May 27, 2009

Abstract

In a recent paper, Minea and Villieu (2009) assert that the 'golden rule of public finance' implies a lower growth rate than the balanced-budget rule. Their contribution is misleading because it is not the 'golden rule of public finance' that generates their result but rather the fact that public debt grows at the same rate as capital and GDP in the long-run in their paper. In this note we demonstrate that the 'golden rule of public finance' yields the same long-run growth rate as the balanced-budget rule provided that public debt asymptotically grows at a smaller rate than capital and GDP.

Keywords: public debt, inter-temporal budget constraint, golden rule of public finance, public capital

JEL Classification: H62, H63, E62

Suggested Citation

Greiner, Alfred, Does the 'Golden Rule of Public Finance' Imply a Lower Long-Run Growth Rate? A Clarification (May 27, 2009). Economics Bulletin, Vol. 30, No. 2, 2010, Available at SSRN: https://ssrn.com/abstract=1410505

Alfred Greiner (Contact Author)

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
Bielefeld, 33501
Germany
+49 521 106 4859 (Phone)
+49 521 106 67120 (Fax)

HOME PAGE: http://phoenix.wiwi.uni-bielefeld.de/lehrbereiche/vwl/wipol

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
140
Abstract Views
664
rank
228,015
PlumX Metrics