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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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
Contact details of provider:
Postal: Loughborough, Leicestershire, LE11 3TU
Phone: +44 (0) 1509 222701
Fax: +44 (0) 1509 223910
Web page: http://www.lboro.ac.uk/departments/sbe/research/economics/index.html
More information through EDIRC
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)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hugo A. Hopenhayn & Maria E. Muniagurría, 1993.
"Policy variability and economic growth,"
Economics Working Papers
30, Department of Economics and Business, Universitat Pompeu Fabra.
- Stanley Fischer & Ratna Sahay & Carlos A. VÃ©gh Gramont, 2002.
"Modern Hyper- and High Inflations,"
IMF Working Papers
02/197, International Monetary Fund.
- Kevin B. Grier & Mark J. Perry, 2000. "The effects of real and nominal uncertainty on inflation and output growth: some garch-m evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(1), pages 45-58.
- Thornton, John, 2008. "Inflation and inflation uncertainty in Argentina, 1810-2005," Economics Letters, Elsevier, vol. 98(3), pages 247-252, March.
- Davide Furceri, 2007. "Is Government Expenditure Volatility Harmful for Growth? A Cross-Country Analysis," Fiscal Studies, Institute for Fiscal Studies, vol. 28(1), pages 103-120, 03.
- Judson, Ruth & Orphanides, Athanasios, 1999.
"Inflation, Volatility and Growth,"
Wiley Blackwell, vol. 2(1), pages 117-38, April.
- Wilson, Bradley Kemp, 2006. "The links between inflation, inflation uncertainty and output growth: New time series evidence from Japan," Journal of Macroeconomics, Elsevier, vol. 28(3), pages 609-620, September.
- Fountas, Stilianos & Karanasos, Menelaos, 2007.
"Inflation, output growth, and nominal and real uncertainty: Empirical evidence for the G7,"
Journal of International Money and Finance,
Elsevier, vol. 26(2), pages 229-250, March.
- Stilianos Fountas & Menelaos Karanasos, 2002. "Inflation, Output Growth, and Nominal and Real Uncertainty: Empirical Evidence for the G7," Working Papers 0064, National University of Ireland Galway, Department of Economics, revised 2002.
- Brunetti, Aymo, 1998. "Policy volatility and economic growth: A comparative, empirical analysis," European Journal of Political Economy, Elsevier, vol. 14(1), pages 35-52, February.
- Logue, Dennis E & Willett, Thomas D, 1976. "A Note on the Relation between the Rate and Variability of Inflation," Economica, London School of Economics and Political Science, vol. 43(17), pages 151-58, May.
- Dotsey, Michael & Sarte, Pierre Daniel, 2000. "Inflation uncertainty and growth in a cash-in-advance economy," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 631-655, June.
- Dimitrios Varvarigos, 2007. "Policy Variability, Productive Spending and Growth," Economica, London School of Economics and Political Science, vol. 74(294), pages 299-313, 05.
- Aizenman, Joshua & Marion, Nancy P, 1993.
"Policy Uncertainty, Persistence and Growth,"
Review of International Economics,
Wiley Blackwell, vol. 1(2), pages 145-63, June.
- Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-72, June.
- Devereux, Michael, 1989. "A Positive Theory of Inflation and Inflation Variance," Economic Inquiry, Western Economic Association International, vol. 27(1), pages 105-16, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Huw Edwards).
If references are entirely missing, you can add them using this form.