Government Expenditure Financing in an Endogenous Growth Model: A Comparison
AbstractThis paper develops a generalized cash-in-advance model of endogenous growth to assess the relative merits of money and income-tax financing of a constant share of government expenditure in GNP. The authors find that money financing (seigniorage) leads to higher growth and inflation rates, pointing out to a trade-off between growth and inflation. Nevertheless, they also find that the financing policy that maximizes welfare is, in general, a mix of the two methods, with the weights depending crucially on the fraction of investment purchases that are subject to the cash-in-advance constraint. Copyright 1995 by Ohio State University Press.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 27 (1995)
Issue (Month): 4 (November)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
Other versions of this item:
- Theodore Palivos & Chong K. Yip, 1995. "Government Expenditure Financing in an Endogenous Growth Model: A Comparison," Departmental Working Papers _057, Chinese University of Hong Kong, Department of Economics.
- Theodore Palivos & Chong K. Yip, 1994. "Government expenditure financing in an endogenous growth model: a comparison," Working Paper 94-1, Federal Reserve Bank of Atlanta.
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