Optimal Economic Growth Using Fiscal and Monetary Policies
AbstractThe literature on growth theory is rich with models attempting to explain growth differences among countries. Several variables have been proposed many of which were found to be positively related to growth. However, a major problem with these models is that the factors explaining growth are endogenously determined by their environment so that a slow-growing or a poor country will find itself helpless because all the crucial variables it has `inherited' are either deficient or inexistent. We propose policyoriented model that empowers (poor or slow-growing) countries in the sense that they can use economic policies to achieve high growth and eliminate the gap of unused productive capacity of society. We demonstrate that such objectives are possible by manipulating some key control variables, namely the rate of interest and the net government spending.
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Bibliographic InfoPaper provided by Aboa Centre for Economics in its series Discussion Papers with number 50.
Date of creation: May 2009
Date of revision:
growth; maximization; fiscal policy; interest rates; deficit; money;
Find related papers by JEL classification:
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O23 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-22 (All new papers)
- NEP-CBA-2009-08-22 (Central Banking)
- NEP-FDG-2009-08-22 (Financial Development & Growth)
- NEP-MON-2009-08-22 (Monetary Economics)
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