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Inflation and Growth in an Open Economy

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  • Palokangas, Tapio

Abstract

This paper examines the relationship between growth and inflation in an open economy where private agents can transfer resources abroad. To obtain endogenous growth, the author assumes that the international credit market is imperfect. He shows that, when the governments behave rationally, the growth and inflation rates should not be correlated and that the optimal inflation rate can be found by setting the interest rate elasticity of money holdings equal to the tax rate elasticity of the tax base. Copyright 1997 by The London School of Economics and Political Science

Suggested Citation

  • Palokangas, Tapio, 1997. "Inflation and Growth in an Open Economy," Economica, London School of Economics and Political Science, vol. 64(255), pages 509-518, August.
  • Handle: RePEc:bla:econom:v:64:y:1997:i:255:p:509-18
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    Cited by:

    1. Shaw, Ming-Fu & Lai, Ching-Chong & Chang, Wen-Ya, 2005. "Anticipated policy and endogenous growth in a small open monetary economy," Journal of International Money and Finance, Elsevier, vol. 24(5), pages 719-743, September.
    2. Saten Kumar & Don J. Webber & Geoff Perry, 2009. "Real wages, inflation and labour productivity in Australia," Working Papers 0921, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    3. Tapio Palokangas, 2003. "Inflationary Financing of Government Expenditure in an Endogenous Growth Model," German Economic Review, Verein für Socialpolitik, vol. 4(1), pages 121-137, February.
    4. Efthymios Tsionas, 2003. "Inflation and Productivity in Europe: An Empirical Investigation," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(1), pages 39-62, March.
    5. Saten Kumar & Don J. Webber & Geoff Perry, 2012. "Real wages, inflation and labour productivity in Australia," Applied Economics, Taylor & Francis Journals, vol. 44(23), pages 2945-2954, August.
    6. Lai, Ching-Chong & Chin, Chi-Ting, 2013. "Monetary Rules And Endogenous Growth In An Open Economy," Macroeconomic Dynamics, Cambridge University Press, vol. 17(02), pages 431-463, March.

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