Debt Sustainability With Implicit Government Debt: Replica and Rejoinder

Some analyses examining the long-term sustainability of government debt use the term implicit government debt. This is an approach that is occasionally criticized. However, the concept of implicit government debt is necessary to evaluate the scope for long-term fiscal policy and to analyze the consequences of demographic change. Krämer and von Weizsäcker reject the assumption of a general positive interest rate-growth differential that is often made in these sustainability analyses. Priewe focuses on the controversy surrounding implicit government debt and explains a theory of interest rates that differs from Krämer and Weizsäcker but leads to similar results.