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Deficit, Seigniorage and the Growth Laffer Curve in developing countries

  • Alexandru MINEA

    ()

    (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

  • Hélène EHRHART

    ()

    (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

  • Patrick VILLIEU

    ()

The endogenous growth literature has established the existence of an inverted-U curve between taxes and economic growth, namely a Growth Laffer Curve (GLC). We develop a growth model with public investment as the engine of perpetual growth, and look for the effect of deficit, tax and money financing on economic growth. We study in particular the way fiscal and monetary policies (through deficit and seigniorage respectively) deform the GLC. An empirical section based on a panel of developing countries provides GMM-system estimators that support our theoretical conclusions.

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Paper provided by CERDI in its series Working Papers with number 200926.

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Length: 25
Date of creation: 2009
Date of revision:
Handle: RePEc:cdi:wpaper:1113
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  1. Zsolt Becsi, 2000. "The shifty Laffer curve," Economic Review, Federal Reserve Bank of Atlanta, issue Q3, pages 53-64.
  2. Trabandt, Mathias & Uhlig, Harald, 2010. "How far are we from the slippery slope? The Laffer curve revisited," Working Paper Series 1174, European Central Bank.
  3. Fisman, Raymond & Svensson, Jakob, 2000. "Are corruption and taxation really harmful to growth? - firm-level evidence," Policy Research Working Paper Series 2485, The World Bank.
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  9. Lucas, Robert E, Jr & Stokey, Nancy L, 1987. "Money and Interest in a Cash-in-Advance Economy," Econometrica, Econometric Society, vol. 55(3), pages 491-513, May.
  10. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
  11. Alexandru MINEA & Patrick VILLIEU, 2008. "Threshold Effects in Monetary and Fiscal Policies in a Growth Model : Assessing the Importance of the Financial System," Working Papers 1666, Orleans Economic Laboratorys, University of Orleans.
  12. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  13. Buchanan, James M & Lee, Dwight R, 1982. "Politics, Time, and the Laffer Curve," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 816-19, August.
  14. Jonsson, Magnus & Klein, Paul, 2003. "Tax distortions in Sweden and the United States," European Economic Review, Elsevier, vol. 47(4), pages 711-729, August.
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  17. Basil DALAMAGAS, 1998. "Testing the Validity of the Laffer-Curve Hypothesis," Annales d'Economie et de Statistique, ENSAE, issue 52, pages 77-102.
  18. Englund, Peter & Svensson, Lars E O, 1988. "Money and Banking in a Cash-in-Advance Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(4), pages 681-705, November.
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  22. repec:chb:bcchwp:03 is not listed on IDEAS
  23. Trabandt, Mathias & Uhlig, Harald, 2011. "The Laffer curve revisited," Journal of Monetary Economics, Elsevier, vol. 58(4), pages 305-327.
  24. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
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  26. Alfonso Novales & Jesús Ruiz, 2001. "Dynamic Laffer Curves," Documentos de Trabajo del ICAE 0106, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
  27. Alexandru Minea & Patrick Villieu, 2009. "Borrowing to Finance Public Investment? The 'Golden Rule of Public Finance' Reconsidered in an Endogenous Growth Setting," Fiscal Studies, Institute for Fiscal Studies, vol. 30(1), pages 103-133, 03.
  28. Adam, Christopher S. & Bevan, David L., 2005. "Fiscal deficits and growth in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 571-597, April.
  29. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
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