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A note on growth and inflation

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  • Ferreira, Pedro Cavalcanti

Abstract

A simple exercise on growth and inflationary financing of public expenditures is presented in this note. In a parameterized overlapping generations mode1 where government expenses positivc1y affects the growth rate of human capital, steady state capital and output increase with inflation, reproducing the so called Tobin effect. For large inflation rates, however, government authorities cannot affect real variables and there are only nominal effects. It is also shown that the optimal policy implies some inflation but not growth maximization.

Suggested Citation

  • Ferreira, Pedro Cavalcanti, 1997. "A note on growth and inflation," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 319, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:319
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    References listed on IDEAS

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    1. Boldrin, Michele, 2005. "Public education and capital accumulation," Research in Economics, Elsevier, vol. 59(2), pages 85-109, June.
    2. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-834, August.
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