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Private and Public Health Expenditures in an Endogenous Growth Model with Inflation Targeting

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Author Info

  • Rangan Gupta

    (University of Pretoria, Department of Economics)

  • Cobus Vermeulen

    (University of Pretoria, Department of Economics)

Abstract

This paper develops a monetary endogenous growth overlapping generations model characterized by endogenous longevity and an inflation targeting monetary authority, and analyzes the growth dynamics that emerges from this framework. Besides the endogenous longevity which depends on the complimentarity of private and public health expenditures, the growth process is endogenized by allowing for a productive role of government expenditure on infrastructure. Following the huge existing literature, money is introduced by assuming that banks are obligated to hold a fraction of the deposits as cash reserve requirements. Given this framework, we show that multiple equilibria emerges, with the low-growth (high-growth) equilibrium being unstable (stable) and locally determinate (locally indeterminate). In addition, we show that, under certain conditions, endogenous fluctuations and even chaos could emerge around the high-growth equilibrium.

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Bibliographic Info

Article provided by Society for AEF in its journal Annals of Economics and Finance.

Volume (Year): 11 (2010)
Issue (Month): 1 (May)
Pages: 139-153

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Handle: RePEc:cuf:journl:y:2010:v:11:i:1:p:139-153

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Related research

Keywords: Indeterminacy; Inflation targeting; Longevity; Multiple equilibria; Overlapping generations; Public health;

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References

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Citations

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Cited by:
  1. Wang, Chan, 2012. "A very preliminary survey on growth and development," MPRA Paper 39037, University Library of Munich, Germany.
  2. Shuyun May Li, Solmaz Moslehi, Siew Ling Yew, 2012. "Public-Private Mix of Health Expenditure: A Political Economy Approach and A Quantitative Exercise," Department of Economics - Working Papers Series 1157, The University of Melbourne.

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