Volatile public spending in a model of money and sustainable growth
AbstractIn a model where seignorage provides the financing instrument for the government’s budget, public spending volatility has an adverse effect on long-run growth. This negative relationship arises because the incidence of volatility in this type of public policy is responsible for higher average money growth, thus induces individuals to devote less time/effort towards capital accumulation. Another implication of the model is that policy variability provides a possible argument behind the positive correlation between inflation and inflation variability.
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Bibliographic InfoPaper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2007_18.
Date of creation: Jul 2007
Date of revision: Jul 2007
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Growth; Inflation; Seignorage; Volatility;
Find related papers by JEL classification:
- E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- O42 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-07-13 (All new papers)
- NEP-CBA-2007-07-13 (Central Banking)
- NEP-DGE-2007-07-13 (Dynamic General Equilibrium)
- NEP-MAC-2007-07-13 (Macroeconomics)
- NEP-MON-2007-07-13 (Monetary Economics)
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