Research On The Size Of Public Debt

Public debt is an instrument of offsetting fiscal deficit. The size of public debt is an important question for studying in the field of public debt. Some questions, such as the size of public debt is at the moderate level or not, how to ascertain and optimize the size of public debt, have very important effects on sufficiently exerting regulation of deficit financing on macroeconomics, actively keeping fiscal risk away, effectively correspond finance and monetary policies. The dissertation probes into the size of public debt in the four aspects of sustainability of deficit financing, the effect of deficit financing on economic growth, equilibrium quantity of the size of public debt and its optimization, monetary characteristics of public debt by the macroeconomic theory and econometric methods.Sustainability of deficit financing reflects that there is long-term equilibrium between government revenues and expenditures,and the size of public debt has still expand room. The study on Sustainability of deficit financing put emphasis upon testing government satisfies its budget constraints or not. The dissertation introduces currently econometric models of testing sustainability of deficit financing, which are I(d) model, Bohn(1998) model and Johansen model, and empirically analyses China's sustainability of deficit financing in the sample of china's revenues and expenditures.Deficit financing has Keynes'effect when the size of public debt is less than the critical level. On the contrary, deficit financing has anti-Keynes'effect when the size of public debt exceeds the critical level. The opinion has been widely accepted. The dissertation discusses the effect of deficit financing on economic growth by SVAR model, and considers that the effect of deficit financing on economic growth should be incarnated via the effect of government revenues and expenditures on economic growth. That is to say, if finance policy of decreasing revenues and increasing expenditures accelerates economic growth, deficit financing is effective and the size of public debt is moderate. Contrarily, deficit financing is not feasible and the size of public debt must be beyond the critical level. Using the pertinent data from the China and the Japan, the dissertation estimates the effects of two countries'deficit financing on economic growth through the output's impulses responses to revenues shock and government spending shock, as well as the output's variance decomposition. The results indicate that the deficit financing policy has the Keynesian effects in China, but anti-Keynesian effects in Japan.The equilibrium quantity of public debt and its optimization is a question to be directly answered in the studying field of public debt. The dissertation develops the existing models by macroeconomic theory in the ground of overseas literatures. The first, basing on OLG model, introducing the variable of productively public capital in the Cobb-Douglas function, assuming that an individual pursues the maximal utility, a firm behaves competitively, and a government implements the deficit budget, the growth rates of technology and knowledge are certain, the dissertation gets the analytical expression to calculate the size of public debt in the state of equilibrium, and puts forward the optimal path of size of public debt in consider of practical economics. The second, basing on infinite-horizon model, introducing the variable of elasticity of substitution between productively public capital and private capital in output function, the dissertation probes into the equilibrium relation among productively public capital, private capital, public debt and economic growth.The monetary characteristic of public debt is mostly embodied that the center bank performs open market operations by public debt, and the monetary organizations, such as the commercial bank, perform credit creation by public debt. So, it is necessary of corresponding finance and monetary policies through the medium of public debt. Concerning the monetary characteristic of public debt, the dissertation discusses separately the size of public debt in the point of inflation and dealing for public debt. The first, the quantity relation is established between the size of public debt and the inflation rate according to China's pertinent data. The second, the dissertation discusses if China's market of public debt can find the interest rate as benchmark through the sensitivity analysis of public debt on interest rate. Public debt is a medium of coupling the finance and monetary policies. It is very necessary of corresponding the finance and monetary policies that the size of public debt is discussed according to the monetary characteristic of public debt.With different attitudes of mind, the size of public debt has differently moderate level. The dissertation thinks that public debt incarnates finance efficacy firstly, and exerts monetary function secondly. Hence the size of public debt should be optimized by principle of reversed regulation of public debt on economic fluctuation, not in the need of developing bond markets. The dissertation discusses briefly the effect of crowding out of public debt and the risk of deficit financing while the size of public debt is discussed.