The effects of systematic high governement debt.

Project Details

Description

The aim is to analyse the consequences of a permanent high government debt in Belgium. The effects on economy policy and on the consumer-saver will be studied. Concerning the effects on economic policy we will especially look for the financial policy room i.e. this part of the yearly increase in government revenues that can be spent 'freely' once change in interest payment will be taken into account. Shocks in interest rates will affect this financial policy room.An important policy consequence of a high level of government debt is that, if policy is to be credible, the deficit can no longer be used as a financial shock absorber. Changes in unavailable government expenditures will then offset by other government spending and/or by taxes. This implies a larger financial uncertainty for the consumer saver. For this reason we will study the effects of financial uncertainty in general and taxation uncertainty in particular, in a second part of the project. The research results could help to understand the relationship between income, saving and the business cycle.
AcronymOZR507
StatusFinished
Effective start/end date1/01/9631/12/00

Keywords

  • Budgetary Policy
  • Public Finances

Flemish discipline codes

  • Economics and business