IDEAS home Printed from https://ideas.repec.org/a/bla/germec/v4y2003i1p121-137.html
   My bibliography  Save this article

Inflationary Financing of Government Expenditure in an Endogenous Growth Model

Author

Listed:
  • Tapio Palokangas

    (University of Helsinki, Finland)

Abstract

This paper analyses the role of inflation in economies with endogenous growth and congestion in public services. Optimal policy rules are derived for public services and investment. The other findings are as follows. Monetary policy should maximize economic growth. The more inefficient the public sector is, the higher the growth--maximizing inflation rate is. If a currency union accepts a new member with an inefficient public sector, this will boost inflation in the union and decrease growth and welfare in all member economies of the union. Copyright Verein für Socialpolitik and Blackwell Publishing Ltd 2003

Suggested Citation

  • 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.
    • Handle: RePEc:bla:germec:v:4:y:2003:i:1:p:121-137
    DOI: 10.1111/1468-0475.00075
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kimbrough, Kent P., 1986. "The optimum quantity of money rule in the theory of public finance," Journal of Monetary Economics, Elsevier, vol. 18(3), pages 277-284, November.
    2. Robert J. Barro & Xavier Sala-I-Martin, 1992. "Public Finance in Models of Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(4), pages 645-661.
    3. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    4. Feenstra, Robert C., 1986. "Functional equivalence between liquidity costs and the utility of money," Journal of Monetary Economics, Elsevier, vol. 17(2), pages 271-291, March.
    5. Pecorino, Paul, 1997. "The Optimal Rate of Inflation When Capital is Taxed," Journal of Macroeconomics, Elsevier, vol. 19(4), pages 657-673, October.
    6. Alfred Greiner & Horst Hanusch, 1998. "Growth and Welfare Effects of Fiscal Policy in an Endogenous Growth Model with Public Investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(3), pages 249-261, July.
    7. repec:bla:econom:v:64:y:1997:i:255:p:509-18 is not listed on IDEAS
    8. Cavalcanti Ferreira, Pedro, 1999. "Inflationary financing of public investment and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 23(4), pages 539-563, February.
    9. Zhang, Junxi, 1996. "A simple pecuniary model of money and growth with transactions cost," Journal of Macroeconomics, Elsevier, vol. 18(1), pages 127-137.
    10. Canzoneri, Matthew B & Rogers, Carol Ann, 1990. "Is the European Community an Optimal Currency Area? Optimal Taxation versus the Cost of Multiple Currencies," American Economic Review, American Economic Association, vol. 80(3), pages 419-433, June.
    11. Huo, Teh-Ming, 1997. "Inflation and Capital Accumulation in a Two-Sector Cash-in-Advance Economy," Journal of Macroeconomics, Elsevier, vol. 19(1), pages 103-115, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Roubini, Nouriel & Sala-i-Martin, Xavier, 1995. "A growth model of inflation, tax evasion, and financial repression," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 275-301, April.
    2. Joseph G. ATTILA, 2008. "Corruption, taxation and economic growth: theory and evidence," Working Papers 200829, CERDI.
    3. Andreas Irmen & Johanna Kuehnel, 2009. "Productive Government Expenditure And Economic Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 23(4), pages 692-733, September.
    4. Fullerton, Don & Kim, Seung-Rae, 2008. "Environmental investment and policy with distortionary taxes, and endogenous growth," Journal of Environmental Economics and Management, Elsevier, vol. 56(2), pages 141-154, September.
    5. Richard Funderburg & Timothy J. Bartik & Alan H. Peters & Peter S. Fisher, 2013. "The Impact Of Marginal Business Taxes On State Manufacturing," Journal of Regional Science, Wiley Blackwell, vol. 53(4), pages 557-582, October.
    6. López-Villavicencio, Antonia & Mignon, Valérie, 2011. "On the impact of inflation on output growth: Does the level of inflation matter?," Journal of Macroeconomics, Elsevier, vol. 33(3), pages 455-464, September.
    7. Aman A. Bara and Bidisha Chakraborty, 2019. "Is Public-private Partnership an Optimal Mode of Provision of Infrastructure?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 44(1), pages 97-123, March.
    8. Jhy-Yuan Shieh & Wen-Ya Chang & Ching-Chong Lai, 2007. "An Endogenous Growth Model Of Capital And Arms Accumulation," Defence and Peace Economics, Taylor & Francis Journals, vol. 18(6), pages 557-575.
    9. Hung, Fu-Sheng, 2005. "Optimal composition of government public capital financing," Journal of Macroeconomics, Elsevier, vol. 27(4), pages 704-723, December.
    10. Ingrid Ott & Stephen J. Turnovsky, 2006. "Excludable and Non‐excludable Public Inputs: Consequences for Economic Growth," Economica, London School of Economics and Political Science, vol. 73(292), pages 725-748, November.
    11. David Owyong & Shandre Thangavelu, 2001. "An empirical study on public capital spillovers from the USA to Canada," Applied Economics, Taylor & Francis Journals, vol. 33(11), pages 1493-1499.
    12. Schreiner, Lena & Madlener, Reinhard, 2022. "Investing in power grid infrastructure as a flexibility option: A DSGE assessment for Germany," Energy Economics, Elsevier, vol. 107(C).
    13. Alexandru Minea & Patrick Villieu, 2006. "Thresholds Effects in Monetary and Fiscal Policies in a simple Cash-in-Advance Endogenous Growth Model," Post-Print halshs-00261219, HAL.
    14. Alexandru Minea & Patrick Villieu, 2006. "Long-Run Monetary and Fiscal Policy Trade-Off in an Endogenous Growth Model with Transaction Costs," Post-Print halshs-00261119, HAL.
    15. Gustavo Marrero, 2010. "Tax-mix, public spending composition and growth," Journal of Economics, Springer, vol. 99(1), pages 29-51, February.
    16. Shin-Chyang Lee & Shang-Fen Wu & Cheng-Te Lee, 2017. "Government Size and Stochastic Growth," Australian Economic Papers, Wiley Blackwell, vol. 56(3), pages 219-227, September.
    17. Uk Heo & John Bohte, 2012. "Who Pays for National Defense? Financing Defense Programs in the United States, 1947–2007," Journal of Conflict Resolution, Peace Science Society (International), vol. 56(3), pages 413-438, June.
    18. ZAREEN, SHUMAILA & Qayyum, Abdul, 2014. "An Analysis of the Impact of Government Size on Economic Growth of Pakistan: An Endogenous Growth," MPRA Paper 85426, University Library of Munich, Germany, revised 2015.
    19. Jaime Alonso-Carrera & Maria Jesus Freire-Seren & Baltasar Manzano, 2008. "Macroeconomic Effects From The Regional Allocation Of Public Capital Formation," CAMA Working Papers 2008-09, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    20. INCEU Adrian Mihai & ZAI Paul, 2012. "Budget Revenues In Eu-27," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 0(4), pages 342-351.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:germec:v:4:y:2003:i:1:p:121-137. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/vfsocea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.