EconPapers    
Economics at your fingertips  
 

INCOMPLETE FINANCIAL MARKETS, IRREVERSIBILITY OF INVESTMENTS AND FISCAL AND MONETARY POLICY INSTRUMENTS*

Kenji Miyazaki, Kiyohiko G. Nishimura and Makoto Saito

The Japanese Economic Review, 2009, vol. 60, issue 3, 271-300

Abstract: In this paper, we analyse the use of fiscal and monetary instruments to improve long‐run welfare when productive investment is irreversible and uncollateralizable and there is no insurance. Only fiat money or government issued bonds provide self‐insurance. We demonstrate that an increase in precautionary savings reduces irreversible productive investment. Hence, subsidies to promote productive but irreversible investment should be financed in such a way that they do not reduce insurance capability. When lump‐sum subsidies are high, a consumption tax is likely to be more redistributive and thus more consumption smoothing than are the other sets of instruments analysed in our model.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/j.1468-5876.2008.00457.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jecrev:v:60:y:2009:i:3:p:271-300

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1352-4739

Access Statistics for this article

The Japanese Economic Review is currently edited by Akira Okada

More articles in The Japanese Economic Review from Japanese Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2025-03-31
Handle: RePEc:bla:jecrev:v:60:y:2009:i:3:p:271-300