Resource title

Long-Run Monetary and Fiscal Policy Trade-Off in an Endogenous Growth Model with Transaction Costs

Resource image

image for OpenScout resource :: Long-Run Monetary and Fiscal Policy Trade-Off in an Endogenous Growth Model with Transaction Costs

Resource description

In this paper, we study maximizing long-run economic growth trade-off in monetary and fiscal policies in an endogenous growth model with transaction costs. We show that both monetary and fiscal policies are subject to threshold effects, a result that gives account of a number of recent empirical findings. Furthermore, the model shows that, to finance public expenditures, maximizing-growth government must choose relatively high seigniorage (respectively income taxation), if ?tax evasion? and ?financial repression? coefficients are high (respectively low). Thus, our model may explain why some governments resort to seigniorage and inflationary finance, and others rather resort to high tax-rate, as result of maximizing-growth strategies in different structural environments (notably concerning tax evasion and financial repression). In addition, the model allows examining how the optimal mix of government finance changes in response to different public debt contexts.

Resource author

P. Villieu, Alexandru Minea

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/19878

Resource license

Adapt according to the presented license agreement and reference the original author.