Hostname: page-component-78c5997874-s2hrs Total loading time: 0 Render date: 2024-11-15T18:43:40.784Z Has data issue: false hasContentIssue false
  • English
  • Français

Fiscal Policy and the National Debt

Published online by Cambridge University Press:  26 March 2020

M.R. Weale
Get access Rights & Permissions [Opens in a new window]

Abstract

The UK National Debt measured as a fraction of GDP has declined sharply since the war. However the large budget deficit and adverse demographic trends mean that the budgetary position is likely to remain of concern. High budget deficits lead to a debt which cannot be serviced and fear of this may lead to higher interest rates. Even when the national debt is kept under control it crowds out domestic and foreign assets and the taxes needed to service it may distort the economy. A policy of holding tax rates virtually constant reduces distortions to the intertemporal pattern o f consumption, but means that government loses control of the path on which the national debt is stabilised. Estimates are provided of the burden imposed through crowding out, and the interaction of monetary and fiscal policy is discussed.

Type
Articles
Information
National Institute Economic Review , Volume 147 , February 1994 , pp. 50 - 61
Copyright
Copyright © 1994 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

∗

In addition to a great deal of help from the other members of the group, I have also benefitted from helpful comments from Anthony Atkinson and Ray Barrell.

The Review is pleased to give hospitality to CLARE Group articles, but is not necessarily in agreement with the views expressed; responsibility for these rests with the author. Members of the CLARE Group are M.J. Artis, A.J.C. Britton, W.A. Brown, W.J Carlin, J.S. Flemming, C.A.E. Goodhart, J.A. Kay, R.C.O. Matthews, D. Miles, M.H. Miller, P.M. Oppenheimer, M.V. Posner, W.B. Reddaway, J.R. Sargent, M.FG. Scott, Z.A. Silberston, J.H.B. Tew, S. Wadhwani and M.R. Weale.

References

Atkinson, A. and Stiglitz, J. (1980), Lectures on Public Economics, McGraw-Hill.Google Scholar
Barro, R. (1974), ‘Are government bonds net wealth?’, Journal of Political Economy, vol. 82, pp.1095–117.CrossRefGoogle Scholar
Barro, R.J. (1979), ‘On the determination of the public debt’, Journal of Political Economy, vol. 8(5), pp. 940–71.Google Scholar
Blanchard, O.J. (1985), ‘Debt, deficits, and finite horizons’, Journal of Political Economy, vol. 93(2), pp. 223–47.CrossRefGoogle Scholar
Blundell, R. (1993), ‘Taxation and labour-supply incentives in the United Kingdom’, in A. Atkinson and G. Mogesen, eds, Welfare and Work Incentives, Clarendon Press.Google Scholar
Buiter, W.H. and Kletzer, K.M. (1992), ‘Who's afraid of the public debt?’, American Economic Review, vol. 82(2), pp. 290–4.Google Scholar
Caporale, G.M. (1992), ‘Fiscal solvency in Europe: Budget deficits and government debt under European Monetary Union’, National Institute Economic Review, vol. 140, pp. 69–77.CrossRefGoogle Scholar
Corsetti, G. (1991), ‘Testing for solvency of the public sector: An application to Italy’, Economic Notes, vol. 20(3), pp. 581–99.Google Scholar
Flemming, J.S. (1988),‘Debt and taxes’, Scottish Journal of Political Economy, vol. 35(4), pp. 305–17.CrossRefGoogle Scholar
Hills, J. (1989), ‘Counting the family silver: The public sector's balance sheet 1957 to 1987’, Fiscal Studies, vol. 10(2), pp. 66–85.CrossRefGoogle Scholar
Keynes, J. (1926), ‘The french franc’, Essays in Persuasion, pp. 76–82.Google Scholar
Keynes, J. (1920), ‘The german transfer problem’, Economic Journal, vol. 39(1), pp. 1–7.CrossRefGoogle Scholar
Layard, R., Nickell, S. and Jackman, R. (1991), Unemployment, Macroeconomic Performance and the Labour Market, Oxford University Press.Google Scholar
Meade, J. (1958), ‘Is the national debt a burden?’, Oxford Economic Papers, vol. 10, pp. 163–83.CrossRefGoogle Scholar
Ohlin, B. (1929), ‘The german reparation problem: A discussion’, Economic Journal, vol. 39(2), pp. 172–8.Google Scholar
Pain, N., Young, G. and Westaway, P. (1993), ‘The state of the public finances’, National Institute Economic Review, vol. 145, pp. 29–42.CrossRefGoogle Scholar
Ricardo, D. (1817), Principles of Political Economy, Penguin Books, 1971.Google Scholar
Sefton, J. and Weale, M. (forthcoming), The Reconciliation of National Income and Expenditure: UK National Accounts, 1920-1990.Google Scholar
Stone, J. and Rowe, D. (1962), ‘A post-war expenditure function’, Manchester School, vol. 30, pp. 187–202.CrossRefGoogle Scholar
Weale, M. (1990), ‘Wealth constraints and consumer behaviour’, Economic Modelling, vol. 7(3), pp. 165–78.CrossRefGoogle Scholar
Weale, M., Blake, A., Christodoulakis, N., Meade, J. and Vines, D. (1989), Macroeconomic Policy: Inflation, Wealth and the Exchange Rate, Unwin Hyman.Google Scholar