We study the relation between capital accumulation, fiscal policy, and sovereign debt dynamics in a small open economy. The government maximizes spending, facing borrowing constraints conditionality requirement. Debt are forward looking, being driven by endogenous constraint. Current is determined expectations about government's ability to finance itself future, opening room for indeterminacy. ...

A decade ago, a national conference of macroeconomic educators called for fundamental reform in the teaching of intermediate macroeconomics, urging instructors to employ a single analytic framework rather than ‘responding to the fragmentation of macroeconomics by teaching a separate model for each school of thought’ (Erekson, Raynold and Salemi, 1996; Salemi and Siegfried, 1999). This paper des...