The current account and the optimal government debt

Assaf Razin*, Lars E.O. Svensson

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

14 Scopus citations

Abstract

In this paper we analyze the optimal response of the current account and the government debt to real disturbances, permanent and temporary. Lumpsum taxes are not feasible and the government income is raised according to the Ramsey rule for optimum taxation. We show that permanent disturbances have no effects on either the private or the government current account if initially there are no deficits. Starting off from the same initial situation both the private sector and the government develop a deficit on current account in response to a temporary disturbance.

Original languageEnglish
Pages (from-to)215-224
Number of pages10
JournalJournal of International Money and Finance
Volume2
Issue number2
DOIs
StatePublished - Aug 1983

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