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Monetary and fiscal policy in an optimising model with capital accumulation and finite lives

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  • Marini, G.

    (Tilburg University, School of Economics and Management)

  • van der Ploeg, F.

    (Tilburg University, School of Economics and Management)

Abstract

This paper considers the effects of monetary and fiscal policies in an optimizing model with capital accumulation and a pos itive birth rate. An increase in monetary growth leads to a reduction in the real interest rate and a boost of capital and total consumpti on. However, the superneutrality result still prevails when open-mark et operations are used to increase monetary growth and preferences ar e separable. A tax-financed fiscal expansion reduces capital and crow ds out consumption by more than 100 percent. A bond-financed fiscal e xpansion increases capital by less and crowds out consumption by more than a money-financed fiscal expansion. Copyright 1988 by Royal Economic Society.
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Suggested Citation

  • Marini, G. & van der Ploeg, F., 1990. "Monetary and fiscal policy in an optimising model with capital accumulation and finite lives," Other publications TiSEM 64ea26d5-c6a6-4b29-b145-6, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:64ea26d5-c6a6-4b29-b145-6f041ce6f588
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