Economic growth with incomplete financial discipline
AbstractWe introduce soft budget constraint and stop-go policy into a stable two-sector AK macro-model. As the extended model does not have any fixed point, we use computer-simulation to examine the dynamic behaviour of the model. We show that depending on the starting position and the parameter values, the economy can follow a path leading to the collapse or moves oscillatory avoiding the downfall. Further on, we demonstrate that the partial shortage of financial discipline leads to wrong investment decisions which slow the process of capital accumulation. The macroeconomic path directed to the collapse can be reversed by strengthening the financial discipline, keeping down corruption, modification of preferences in investment policy or exogenous technological change.
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 University Library of Munich, Germany in its series MPRA Paper with number 40358.
Date of creation: 2012
Date of revision:
chaotic dynamics; simulation; bribe;
Find related papers by JEL classification:
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
This paper has been announced in the following NEP Reports:
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.:
- Miles S. Kimball & John G. Fernald & Susanto Basu, 2006.
"Are Technology Improvements Contractionary?,"
American Economic Review,
American Economic Association, vol. 96(5), pages 1418-1448, December.
- Susanto Basu & John Fernald & Miles Kimball, 2004. "Are Technology Improvements Contractionary?," NBER Working Papers 10592, National Bureau of Economic Research, Inc.
- Susanto Basu & John Fernald & Miles Kimball, 1998. "Are technology improvements contractionary?," International Finance Discussion Papers 625, Board of Governors of the Federal Reserve System (U.S.).
- Susanto Basu & John Fernald & Miles Kimball, 2002. "Are Technology Improvements Contractionary?," Harvard Institute of Economic Research Working Papers 1986, Harvard - Institute of Economic Research.
- Susanto Basu & John Fernald & Miles Kimball, 2004. "Are technology improvements contractionary?," Working Paper Series WP-04-20, Federal Reserve Bank of Chicago.
- Jordi GalÃ & Pau Rabanal, 2004. "Technology Shocks and Aggregate Fluctuations," IMF Working Papers 04/234, International Monetary Fund.
- Bródy, András, 2002.
"Gazdasági számvetés. Tőkék és áramlatok
[Economic accounting. Sums and flows of capital]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 943-959.
- Bródy, András, 2003.
"Arány, ütem és forma. A ciklusok alaktanához
[Proportion, pace and shape. Towards a morphology of cycles]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 136-151.
- Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.