The (UN)importance of public debt: A review essay

Summary In this article the debate on the consequences of the creation and existence of government debt is reviewed, using two recent books as a guideline. Four issues in particular are discussed: the correct definition and measurement of government debt, the discussion on the (in)effectiveness of fiscal policy, the inflationary consequences of public debt and finally the influence of government deficits on financial markets. It follows from our review of the debate that there exists as yet no consensus among economists on these issues.The author would like to thank Professor S.K. Kuipers, Professor J. Pen, Dr. C.G.M. Sterks and Professor J. Weitenberg for their comments on an earlier version of this paper.