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Optimal Government Finance And Democracy In Developing Countries

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  • Renee D. Nieberding

    ()
    (The Ohio State University)

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    Abstract

    Optimal government finance models illustrating trade-offs between different policy instruments, such as seigniorage and income taxes, have focused on industrialized countries. In this paper, a model that includes the effective reserve ratio and currency growth rate as instruments is derived from a welfare loss function and is estimated using fixed effects for a sample of 29 developing countries. The results indicate that the governments in the sample use the reserve requirement to minimize the welfare losses associated with seigniorage revenue. Mid-level democracies are associated with the highest effective reserve ratios.

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    File URL: http://www.jed.or.kr/full-text/29-2/Renee.pdf
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    Bibliographic Info

    Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

    Volume (Year): 29 (2004)
    Issue (Month): 2 (December)
    Pages: 131-148

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    Handle: RePEc:jed:journl:v:29:y:2004:i:2:p:131-148

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    Related research

    Keywords: Reserve Ratio; Currency Growth; Seigniorage; Democracy;

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    1. Jonathan Eaton, 1994. "Cross-Border Banking," NBER Working Papers 4686, National Bureau of Economic Research, Inc.
    2. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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