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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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