This paper investigates whether monetary and fiscal policies, such as lump-sum taxes and monetization of pubic deficit, have environmental impacts. We address this question extending the neoclassical monetary growth model. We include a state equation for natural resources, and consider natural resources as an input in the production function. Fiscal policy, through public spending, always has environmental impact. Monetary policy affects the environment if money is considered as a device to reduce transactions costs or as necessary to buy goods according to cash-in-advance models. However, the qualitative impact of both policies on the environment cannot be determined. All results depend on the effect of capital on the natural resources dynamics. The model provides a framework which relates public spending and inflation with environment.
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Paper provided by Department of Economics, University of Kent in its series Studies in Economics with number
9616.
Length: Date of creation: 1996 Date of revision: Publication status: Published in Economic Modelling, 1998, 15, pp.113-123 Handle: RePEc:ukc:ukcedp:9616
Contact details of provider: Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP Phone: +44 (0)1227 764000 Fax: +44 (0)1227 827850 Web page: http://www.ukc.ac.uk/economics/
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Find related papers by JEL classification: E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
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