Pleasant mathematics

Vol. 28 No. 3 (2008)

Jul-Sep / 2008
Published July 1, 2008
PDF-Portuguese (Português (Brasil))
PDF-Portuguese (Português (Brasil))

How to Cite

Lima, Gerson. 2008. “Pleasant Mathematics”. Brazilian Journal of Political Economy 28 (3):471-89.

Pleasant mathematics

Gerson Lima
Professor de Teoria e política econômica da FACINTER — Faculdade Internacional de Curitiba
Brazilian Journal of Political Economy, Vol. 28 No. 3 (2008), Jul-Sep / 2008, Pages 471-489


This paper suggests a reconsideration of the principle that public deficits should be financed by public debt. Two main reasons are offered. First, it is admitted that public debt is an economic variable whose time behaviour is better described by a first difference equation instead of an accounting identity. The convergence condition thus obtained requires either a nominal negative interest rate or that government bonds are used to raise tax income, hypotheses not theoretically granted. As a consequence, if primary surplus is not sufficient to match interests’ payment, it will be observed an explosive trend in the public debt, the due interests and the money issuing. Therefore, it lacks support to the idea that public debt prevents inflation. Second, it is shown that financing public deficit through money issuing leads to a stable equilibrium money stock. The general conclusion is that, in order to simultaneously promote economic growth and inflation control, money issuing is preferable to public debt.

JEL Classification: E5; E6.

Keywords: public debt monetary policy money issuing