The debt trap: A two-compartment train wreck… and how to avoid it

Fabio Tramontana, Marc Artzrouni

Risultato della ricerca: Contributo in rivistaArticolo in rivistapeer review

2 Citazioni (Scopus)

Abstract

We explore sustainable paths out of a debt trap with a highly stylized two-sector differential equations model for the stocks of money in Government and Society. The model fits the data for the U.S. between 1981 and 2012 with a coefficient of correlation of 0.996. The solutions provide detailed “escape conditions” from the debt trap. A primary surplus is required. Then a government can escape its debt trap either through sustained annual monetary outflows from society to the government (taxation) but with a low initial growth rate, or through annual monetary inflows into both sectors (stimulus) with higher initial growth rate. We illustrate the use of our model with simulations which show how five indebted countries can escape their debt trap in 30 (or 70) years.
Lingua originaleEnglish
pagine (da-a)241-256
Numero di pagine16
RivistaJournal of Policy Modeling
Volume36
DOI
Stato di pubblicazionePubblicato - 2014

Keywords

  • Compartmental model
  • Dynamic model

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