National debt sustainability and the dynamics in the economy of Diamond
نویسندگان
چکیده
We analyze the e ect of constant debt policy on capital accumulation and provide an in depth treatment of the dynamics in the economy of Diamond. We derive the conditions for avoiding debt crisis in both the short-run and the long-run and provide geometrical tools to analyze the issue of sustainability. There is always a level of debt ensuring that any level of capital between 0 and an upper limit, and in particular the Golden rule equilibrium, exists as a steady-state equilibrium, but is not necessarily stable. Poverty trap issues are also discussed. JEL Classi cation numbers: E32, O41.
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