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 InfoPaper provided by Chinese University of Hong Kong, Department of Economics in its series Departmental Working Papers with number _057.
Date of creation: Apr 1995
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Other versions of this item:
- Palivos, Theodore & Yip, Chong K, 1995. "Government Expenditure Financing in an Endogenous Growth Model: A Comparison," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1159-78, November.
- 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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