Sustainable debt and deficits in Emerging Markets
by Ashima Goyal
International Journal of Trade and Global Markets (IJTGM), Vol. 4, No. 2, 2011

Abstract: Rising deficits and high debt ratios characterised currency crises in countries with low private savings rates and low population densities. But in emerging markets with large population transferring to more productive employment, sustainable debts and deficits may be higher. Debt ratios fall with growth rates. Higher private savings can compensate for government dissaving. An optimising model of such an economy with dualistic labour markets and two types of consumers demonstrates these features but also shows debt ratios tend to rise in high growth phases. Policy conclusions for fiscal consolidation and coordination with monetary policy are derived in the Indian context.

Online publication date: Wed, 08-Apr-2015

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