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

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  • 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.

Suggested Citation

  • Rangan Gupta & Cobus Vermeulen, 2010. "Private and Public Health Expenditures in an Endogenous Growth Model with Inflation Targeting," Working Papers 201001, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201001
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Gupta, Rangan & Makena, Philton, 2020. "Why must it always be so Real with tax evasion?," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 304-308.
    2. Rangan Gupta & Philton Makena, 2020. "Growth Dynamics, Multiple Equilibria, and Local Indeterminacy in an Endogenous Growth Model of Money, Banking and Inflation Targeting," Economies, MDPI, Open Access Journal, vol. 8(1), pages 1-1, March.
    3. Gupta, Rangan & Stander, Lardo, 2018. "Endogenous fluctuations in an endogenous growth model: An analysis of inflation targeting as a policy," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 1-8.
    4. Wang, Chan, 2012. "A very preliminary survey on growth and development," MPRA Paper 39037, University Library of Munich, Germany.
    5. Rangan Gupta & Lardo Stander, 2014. "Endogenous Fluctuations in an Endogenous Growth Model with Inflation Targeting," Working Papers 201432, University of Pretoria, Department of Economics.
    6. repec:ipg:wpaper:2014-461 is not listed on IDEAS
    7. 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.
    8. Shuyun May Li & Solmaz Moslehi & Siew Ling Yew, 2016. "Public–private mix of health expenditure: A political economy and quantitative analysis," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(2), pages 834-866, May.

    More about this item

    Keywords

    Indeterminancy; Inflation targeting; Longevity; Multiple equilibria; Overlapping generations; Public health;

    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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