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Deficit, monetization, and economic growth: a case for multiplicity and indeterminacy

Author

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  • Maxime Menuet

    (LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - Université de Tours - CNRS - Centre National de la Recherche Scientifique)

  • Alexandru Minea

    (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique)

  • Patrick Villieu

    () (LEO - Laboratoire d'Economie d'Orléans - Université - CNRS - Centre National de la Recherche Scientifique)

Abstract

Abstract This paper develops an original analysis of deficit monetization in a growth model with transaction costs, in which economic growth interacts with productive public expenditures. This interaction generates two positive balanced growth paths (BGP) in the long run: a high BGP and a low BGP. The transitional dynamics show that multiplicity cannot be rejected if transaction costs affect both consumption and investment expenditures, with possible indeterminacy of the high BGP. Importantly, deficit monetization is shown to reduce the parameter space producing indeterminacy.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Maxime Menuet & Alexandru Minea & Patrick Villieu, 2018. "Deficit, monetization, and economic growth: a case for multiplicity and indeterminacy," Post-Print hal-01682711, HAL.
  • Handle: RePEc:hal:journl:hal-01682711
    DOI: 10.1007/s00199-017-1040-5
    Note: View the original document on HAL open archive server: https://hal-clermont-univ.archives-ouvertes.fr/hal-01682711
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    More about this item

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • 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
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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