Taiwan's Optimal Public Debt Ratio

• Main Author: 簡筱芬
• Other Authors: 黃瓊如
• Format: Others
• Language: zh-TW
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/62399168264276038846

碩士 === 逢甲大學 === 財稅學系 === 101 === Optimal public debt ratio empirical studies in Taiwan are mostly in the pursuit of public debt sustainability or economic growth maximizing. No empirical study explores the pursuit of welfare maximization of the public debt ratio in Taiwan. Therefore, this study adopts Aiyagari and McGrattan (1998) model, in a dynamic stochastic general equilibrium framework, using Taiwan&;#39;s 2001 to 2011 economic data and Matlab software to do the dynamic simulation analysis and discuss the optimal public debt ratio under the welfare maximization. In addition, this study examines changes in public debt to GDP ratio from 0.1 to 0.6 affecting interest rates, working hours, tax rate, consumption, and welfare. The simulation results show that an increase in the public debt ratio will cause increases in the tax rate and the interest rate, but decreases in the consumption ratio and working hours. Results also indicate that the welfare is maximizing at the public debt to GDP ratio 0.2. That is, the optimal public debt ratio is 20% GDP. Besides, if the public debt to GDP ratio is greater than 40%, then the welfare is negative, that is, a welfare loss. Therefore, the government wants to achieve maximum social welfare, the debt ceiling should be set to 20% GDP. If the government is not able to reduce the public debt ratio to 20% GDP in the short run, then at least the government ought to control the public debt ratio at 40% GDP, in spite of, the Public Debt Act recently passed the draft amendment to the debt ceiling set by 50% GDP.