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Private and Public Health Expenditures in an Endogenous Growth Model with Inflation Targeting

Author Info

  • Rangan Gupta

    ()

    (Department of Economics, University of Pretoria)

  • Cobus Vermeulen

    ()

    (Department of Economics, University of Pretoria and Department of Economics, University of South Africa (UNISA))

Abstract

This paper develops a monetary endogenous growth overlapping generations model characterized by endogenous longevity and an inflation targeting monetary authority, and analyzes the growth dynamics that emerges from this framework. Besides the endogenous longevity which depends on the complimentarity of private and public health expenditures, the growth process is endogenized by allowing for a productive role of government expenditure on infrastructure. Following the huge existing literature, money is introduced by assuming that banks are obligated to hold a fraction of the deposits as cash reserve requirements. Given this framework, we show that multiple equilibria emerges, with the low-growth (high-growth) equilibrium being unstable (stable) and locally determinate (locally indeterminate). In addition, we show that, under certain conditions, endogenous fluctuations and even chaos could emerge around the high-growth equilibrium.

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Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201001.

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Length: 22 pages
Date of creation: Feb 2010
Date of revision:
Handle: RePEc:pre:wpaper:201001
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Keywords: Indeterminancy; Inflation targeting; Longevity; Multiple equilibria; Overlapping generations; Public health;

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Find related papers by JEL classification:
  • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
  • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
  • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
  • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
  • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
  • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
  • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
  • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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  1. Cervellati, Matteo & Sunde, Uwe, 2005. "Human capital formation, life expectancy, and the process of development," Munich Reprints in Economics 20083, University of Munich, Department of Economics.
  2. Pierre-Richard Agénor, 2015. "Public capital, health persistence and poverty traps," Journal of Economics, Springer, vol. 115(2), pages 103-131, June.
  3. Hazan, Moshe & Zoabi, Hosny, 2005. "Does Longevity Cause Growth?," CEPR Discussion Papers 4931, C.E.P.R. Discussion Papers.
  4. Bhattacharya, Joydeep & Qiao, Xue, 2005. "Public and Private Expenditures on Health in a Growth Model," Staff General Research Papers Archive 12378, Iowa State University, Department of Economics.
  5. Rangan Gupta, 2005. "Costly State Monitoring and Reserve Requirements," Annals of Economics and Finance, Society for AEF, vol. 6(2), pages 263-288, November.
  6. Kam Ki Tang & Jie Zhang, 2007. "Health, Education, And Life Cycle Savings In The Development Process," Economic Inquiry, Western Economic Association International, vol. 45(3), pages 615-630, 07.
  7. Rangan Gupta & Emmanuel Ziramba, 2008. "Openness, Bureaucratic Corruption and Public Policy in an Endogenous Growth Model," Working Papers 200817, University of Pretoria, Department of Economics.
  8. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
  9. Been-Lon Chen & Yeong-Yuh Chiang & Ping Wang, 2008. "Credit Market Imperfections and Long-Run Macroeconomic Consequences," Annals of Economics and Finance, Society for AEF, vol. 9(1), pages 151-175, May.
  10. Rangan Gupta, 2008. "Currency Substitution and Financial Repression," Working Papers 200806, University of Pretoria, Department of Economics.
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  14. Rangan Gupta, 2005. "Tax Evasion and Financial Repression," Working papers 2005-34, University of Connecticut, Department of Economics, revised Jun 2007.
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  18. Rangan Gupta & Emmanuel Ziramba, 2009. "Tax evasion and financial repression: a reconsideration using endogenous growth models," Journal of Economic Studies, Emerald Group Publishing, vol. 36(6), pages 660-674, November.
  19. Rangan Gupta & Emmanuel Ziramba, 2008. "Costly Tax Enforcement and Financial Repression," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 37(2), pages 141-154, 07.
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  24. Diamond, Peter & Yellin, Joel, 1990. "Inventories and Money Holdings in a Search Economy," Econometrica, Econometric Society, vol. 58(4), pages 929-50, July.
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  31. repec:gdm:wpaper:0706 is not listed on IDEAS
  32. repec:ebl:ecbull:v:15:y:2005:i:8:p:1-8 is not listed on IDEAS
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Cited by:

  1. Shuyun May Li, Solmaz Moslehi, Siew Ling Yew, 2012. "Public-Private Mix of Health Expenditure: A Political Economy Approach and A Quantitative Exercise," Department of Economics - Working Papers Series 1157, The University of Melbourne.
  2. Rangan Gupta & Lardo Stander, 2014. "Endogenous Fluctuations in an Endogenous Growth Model with Inflation Targeting," Working Papers 201432, University of Pretoria, Department of Economics.
  3. Wang, Chan, 2012. "A very preliminary survey on growth and development," MPRA Paper 39037, University Library of Munich, Germany.
  4. repec:ipg:wpaper:2014-461 is not listed on IDEAS

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