Government Debt in Denmark
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Thuesen, Signe 1, Forfatter
Schou, Poul 2, Vejleder
1Det Samfundsvidenskabelige Fakultet, Københavns Universitet, København, Danmark, diskurs:7001              
2Økonomisk Institut, Det Samfundsvidenskabelige Fakultet, Københavns Universitet, København, Danmark, diskurs:7014              
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Ukontrollerede emneord: Government Debt, CGE
 Abstract: This paper examines the classic topic of globalization and democratization’s connectivity with a renewed empirical angle. For decades, political and economic literature has tried to debunk whether democracy goes handOinOhand with globalization, or if the given tendency is simply arbitrary. The purpose of this thesis is to investigate the hypothesis that globalization leads to democratization using the Internet as a nonOtraditional empirical variable. Causality is restricted to the effects of globalization on democratization, and not the reverse relationship. While that rules out many other interesting aspects of this topic, it is done to delineate the focus area.

The numerical growth of democracies worldwide in the twentieth century was notably observed by Samuel P. Huntington in 1991. During the same period, globalization also expanded comprehensively. This empirical study begins by fully defining democracy and globalization and ascribes empirical instruments through which one can observe their connection. This paper chose Polity and Freedom House’s quantitative measure of democracy, as it is one of the few available and reliable data sets. On theother hand, there are numerous options for quantitative indicators of globalization. This paper differentiates itself from related literature by diverging on traditional choices for globalization indicators, by selecting the Internet as the primary measure. As this choice is uncommon, the paper also includes two more traditionally used variables for globalization: trade and tourism. The use of these three variables hopes to capture the full effects of globalization on democracy.

This thesis investigate how an endogenous interest rate on Danish government bonds can consist an element of credibility regarding the the government sector’s fiscal policy and how it can be modeled in a applied general equilibrium model of a small open economy as the Danish economy. Further, with a reasonable modeling of the endogenous interest rate it is investigated how the credibility of the Danish Fiscal policy will be affected by an increasing pressure on the government budget.
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Bogmærk denne post:
 Type: Speciale
Alternativ titel: - a CGE Model
Alternativ titel: Statsgæld i Danmark
Alternativ titel: - en AGL model
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Sprog: English - eng
 Datoer: 2011-11-25
 Sider: -
 Publiceringsinfo: København : Københavns Universitet
 Indholdsfortegnelse: 1 Introduction 1
1.1 Greece Disease Is Spreading? 1
1.2 The Problem . 3
1.2.1 The CGE Method . 4
1.3 Findings 5
1.4 Organization of the Thesis 5
2 The Link Between Government Debt and Long Term Interest Rate 6
2.1 Budget Deficit, Debt and Interest Rate . 6
2.1.1 Government Budget Deficit . 7
2.1.2 Government Debt . 7
2.1.3 Long Term Nominal Interest Rate 9
2.2 Empirical Studies of Government Debt and Interest Rate . 13
2.2.1 Risk Premiums Compared to A Benchmark Case . 13
2.2.2 Current Variables Versus Expected Future Variables 15
2.2.3 Government Budget Deficits and Nominal Interest Rates . 16
2.2.4 Responsibility and Sustainability of the Danish Fiscal Policy . 19
2.2.5 Summary of the Empirical Literature 21
2.3 Specification of the Risk Premium 21
2.3.1 Instrument of Risk Premium . 23
2.3.2 Sustainability Criterion 24
2.4 Credibility and the Interest Rate 25
3 The Model 26
3.1 Limitations and Simplifications of the Model 26
3.1.1 Choice of Diamond Model 26
3.1.2 Retirement Age 28
3.1.3 Occupational Pension Scheme 29
3.1.4 Age Depending Government Expenditures . 31
3.1.5 Labor Market and Participation Rate 31
3.2 A Model of the Danish Economy 32
3.2.1 The Household Sector 32
3.2.2 The Production Sector 38
3.2.3 The Government Sector . 40
3.2.4 The Foreign Sector 44
3.2.5 Equilibrium Conditions 44
4 Calibration of the Model 46
4.1 Benchmark Data . 46
4.2 Exogenous Parameter Estimates . 49
4.3 Calibrated Parameters 50
4.4 Replication of Data 51
5 A Change in the Government Budget 53
5.1 The Government Sector . 55
5.2 Labor Supply . 58
5.3 Capital, Investments and Production 59
5.4 Consumption and Wealth 59
6 Robustness of Empirical Results 60
7 Is the Danish Fiscal Policy Credible? 63
7.1 Applicability of the CGE Approach . 63
7.2 The Projection of the Danish Economy . 65
7.2.1 The Retirement Age . 65
7.2.2 Changes in Government Revenue and Expenditure 66
7.2.3 Imperfect Loan Markets . 67
7.2.4 Steady State in the Calibration Year 67
7.2.5 Net or Gross Government Debt . 68
7.2.6 Sustainability and Credibility of the Danish Fiscal Policy . 69
7.3 Policy Implications 69
8 Conclusion 71
A Government Net Expenditure 78
B Parameters and Variables 80
C Development of Variables 83
D The GAMS Program 89
 Note: -
 Type: Speciale
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