A note on fiscal policy, indeterminacy, and endogenous time preference

Toshiki Tamai

Economics Bulletin, 2019, vol. 39, issue 1, 615-625

Abstract: This paper presents an endogenous growth model with productive public goods and an endogenous time preference. The time preference is positively associated with consumption and negatively affected by income. Fiscal policy not only directly influences macroeconomic equilibrium and therefore the dynamic stability of macroeconomic equilibria but also indirectly influences them via the endogenous time preference. The overall effect of productive public goods provides a strong externality that generates indeterminacies of the equilibrium growth paths. This study derives the sufficient condition for the indeterminacy and clarifies the relation between fiscal policy and indeterminacy. The results show that Barro's (1990) tax rule for growth and welfare maximization, which equals the output elasticity of productive public goods, attains its purpose and stabilization of the dynamic equilibrium under certain conditions.

Keywords: Fiscal policy; Indeterminacy; Endogenous time preference (search for similar items in EconPapers)
JEL-codes: H5 Q4 (search for similar items in EconPapers)
Date: 2019-03-16
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2019/Volume39/EB-19-V39-I1-P62.pdf (application/pdf)

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:ebl:ecbull:eb-19-00277

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().