The Economic Effects Of Public Debt

Since the first fOreign debt in l979 and the first dOmestic debt in l98l, the mushroom growthof public debt in China has evOkd much contrOversy, with one opinon that the existing debt hasbecome a heaVy burden to the govemmen and infiuenced the healthy operation of the macro-economy, verss another one that there is shll great.space in the issuance of Public debtS in viewof "loanable potential". Then, in a period of tusition economy, What kind of policy should beadopted to make the issuance of public debtS benefit China rather than othdrise lead to a debtcrisis for the govenunent? Following the famous economists lthe Adam Smith, Lecato,--Keynes,and TObin, the Prevailing theorehc stUdy on Chinse Public debtS usually Ouly concentrates in.demand; differently the author tries tO illustrae the relative toPics at a new angel and names hisdissertation as "The stUdy on efficiency of public debtS".Besides the intrOduchon, the dissertahon consistS of eigh chaPtery, with the main colltenis asfollow,The thet chaPter traCes back the Origin and develoPment of Public debtS in westem countriesand the history of Chinese public debts as well. According to the author, modem syStem of publicdebts is developed with caPitalism; in China, not until 1ate Qing dynaSty did public debts comeinto existence fOrmally whereas the public debtS of that drie was far from nonnal and led to greatdestrOy tO the economy Ths chaPter also makes an unbiased cotnment on the public debts ofdifferent stages before and arOUn the foundation of the People's RePublic of China.The second chaPter concentrates on the theories of public debtS in a view of efficiency Theschool of negative efficiency on Public debtS oped against the issuance of public debts, believingin that public debts will do hann to the caPital accumulation and national economy by drawing outcaPital from production area into consuming expendit'Ure. On the contrary with the hauntingeconomic crises, some new schools emerged to believe in the positive efficiency of public debtsunder the condition of deficit of actUal demand. Besides, this chapter also mentions about thereason Why Lecanto's equal principle lost its effects.The third chapter discusses the relationship betWeen public debts and aggregate supply,together with economic groWth. Cobb-Douglas production function is here used to desctibe the.relationship between public debtS and economic groWth, Which leads to the conclusion that public3debts will accelerate the national economy in case it is for the increase of pubIic capital investment,for its supplement effect with the private capital wi1l raise the efficiency and therefore level up themarginal production of the 1atter. Besides, the chapter also discusses the relationship among theoptimal public debts, public debts and the strUctUre of public capital, and argues that public debtsshould be spent on those "public capital goods" with high teclinique multiplief, high coefficient inrelationship and influence, and great effect in affection. At last, the author discusses therelationship betWeen economic growth and the optimal portfolios of public debts versus taxation.The fourth chapter specifies the relationship betWeen public debtS and aggregate demand.First, the consumphon funchon of life-cycle saving model is used to analyze the infiuence ofPublic debtS on consumphon demand, namely, the Public debtS act on consumphon function byreducing cmt tax and changing interest rate. Secondly' the author discusses the Anpact of publicdebtS on investment deInand. DePending on the balance of the tWO channels ofboact, in the samedirechon or not, via intere8t rate or exPect6d caPital revenue, the Public debtS present "crowdingoat effect" or "crowding in effect". Finally, the chaPter discusses the hopact of public debtS onbalance of paymentS and exchange rate, and itS interactive relationship with the adjustInent ofeconomic smicthe.The fifth chaPter stUdies the hopact of publi...