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A note on fiscal policy, indeterminacy, and endogenous time preference

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  • Toshiki Tamai

    (Graduate School of Economics, Nagoya University)

Abstract

This paper presents an endogenous growth model with productive public goods and an endogenous time preference. The time preference is positively associated with consumption and negatively affected by income. Fiscal policy not only directly influences macroeconomic equilibrium and therefore the dynamic stability of macroeconomic equilibria but also indirectly influences them via the endogenous time preference. The overall effect of productive public goods provides a strong externality that generates indeterminacies of the equilibrium growth paths. This study derives the sufficient condition for the indeterminacy and clarifies the relation between fiscal policy and indeterminacy. The results show that Barro's (1990) tax rule for growth and welfare maximization, which equals the output elasticity of productive public goods, attains its purpose and stabilization of the dynamic equilibrium under certain conditions.

Suggested Citation

  • Toshiki Tamai, 2019. "A note on fiscal policy, indeterminacy, and endogenous time preference," Economics Bulletin, AccessEcon, vol. 39(1), pages 615-625.
    • Handle: RePEc:ebl:ecbull:eb-19-00277
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal policy; Indeterminacy; Endogenous time preference;
    All these keywords.

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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