This paper analyzes the effects of public debt on endogenous growth
in an overlapping generations model. The government fixes the budget
deficit ratio. If the deficit ratio stays below a critical level, then
there are two steady states where capital, output, and public debt
grow at the same constant rate. An increase in the deficit ratio reduces
the growth rate. If the deficit ratio exceeds the critical level,
then there is no steady state. Capital growth declines continuously,
and capital is driven down to zero in finite tim