Public debt ratio dynamics and fiscal solvency: A generalised version with transaction money and investment money

We generalise the usual approach to the public debt ratio dynamics and to the determination of the fiscal solvency condition by dividing demand for money into transaction money and investment money. Transaction money is linked to nominal income (GDP), investment money is a part of total wealth, which includes money, bonds and other assets (equities, real estate). We can then see that there are five ways to restore fiscal solvency: Increasing the primary fiscal surplus; Reducing the gap between the real interest rate and real growth; Reducing the nominal interest rate; Increasing inflation (using the inflation tax); Increasing the relative price of other assets (this is a form of inflation tax that works through asset prices) .