IDEAS home Printed from https://ideas.repec.org/p/tkk/dpaper/dp50.html
   My bibliography  Save this paper

Optimal Economic Growth Using Fiscal and Monetary Policies

Author

Listed:
  • Hassan Bougrine
  • Teppo Rakkolainen

Abstract

The literature on growth theory is rich with models attempting to explain growth differences among countries. Several variables have been proposed many of which were found to be positively related to growth. However, a major problem with these models is that the factors explaining growth are endogenously determined by their environment so that a slow-growing or a poor country will find itself helpless because all the crucial variables it has `inherited' are either deficient or inexistent. We propose policyoriented model that empowers (poor or slow-growing) countries in the sense that they can use economic policies to achieve high growth and eliminate the gap of unused productive capacity of society. We demonstrate that such objectives are possible by manipulating some key control variables, namely the rate of interest and the net government spending.

Suggested Citation

  • Hassan Bougrine & Teppo Rakkolainen, 2009. "Optimal Economic Growth Using Fiscal and Monetary Policies," Discussion Papers 50, Aboa Centre for Economics.
  • Handle: RePEc:tkk:dpaper:dp50
    as

    Download full text from publisher

    File URL: http://www.ace-economics.fi/kuvat/dp%2050.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Wynne Goldey & Marc Lavoie, 2007. "Fiscal policy in a stock-flow consistent (SFC) model," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 30(1), pages 79-100.
    2. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1203-1250.
    3. Barro, Robert J. & Lee, Jong-Wha, 1993. "International comparisons of educational attainment," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 363-394, December.
    4. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
    5. Alice Amsden, 2007. "The Tyranny of Empire: Another View of Development," Challenge, Taylor & Francis Journals, vol. 50(5), pages 17-27.
    6. Dutt, Amitava Krishna, 1992. "The Origins of Uneven Development: The Indian Subcontinent," American Economic Review, American Economic Association, vol. 82(2), pages 146-150, May.
    7. Marc Lavoie & Mario Seccareccia, 2006. "The Bank of Canada and the Modern View of Central Banking," International Journal of Political Economy, Taylor & Francis Journals, vol. 35(1), pages 44-61.
    8. Hassan Bougrine & Mario Seccareccia, 2002. "Money, Taxes, Public Spending, and the State Within a Circuitist Perspective," International Journal of Political Economy, Taylor & Francis Journals, vol. 32(3), pages 58-79.
    9. Blanca Sanchez-Robles, 1998. "Infrastructure Investment And Growth: Some Empirical Evidence," Contemporary Economic Policy, Western Economic Association International, vol. 16(1), pages 98-108, January.
    10. Oliver Dieckmann, 1996. "Cultural determinants of economic growth: Theory and evidence," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 20(4), pages 297-320, December.
    11. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    growth; maximization; fiscal policy; interest rates; deficit; money;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tkk:dpaper:dp50. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Aleksandra Maslowska). General contact details of provider: http://edirc.repec.org/data/tukkkfi.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.