Government Spending, Money Seigniorage and Macroeconomic Instability
AbstractThis paper addresses the issue of the macroeconomic instability of the output effects of government spending financed by money seigniorage. The contribution of the paper is to show that these output effects are dependent on where the economy is in relation to certain inflation thresholds and that these thresholds are affected by the degree of ‘substitutability’ between government spending and private consumption. When government spending has no intertemporal effect on private consumption, there exists a single inflation threshold. When government spending has an intertemporal effect on private consumption, there exist two inflation thresholds. As the economy crosses each inflation threshold, it will suffer a reversal of output effects.
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Bibliographic InfoPaper provided by Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre in its series Economic Growth centre Working Paper Series with number 0512.
Length: 20 pages
Date of creation: Dec 2005
Date of revision:
reversal of output effects; inflation; money seigniorage; substitutability; complementarity;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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