Fiscal and Monetary Policy Interactions in an Endogenous Growth Model with Financial Intermediaries
Marco Espinosa-Vega () and
Chong Yip
International Economic Review, 1999, vol. 40, issue 3, 595-615
Abstract:
This paper presents a framework that can help reconcile conflicting findings in the growth-inflation literature. Here, the behavior of financial intermediaries plays a crucial role in the determination of the economy's inflation and real growth rates. Absent any restrictions on financial intermediation, there will be a unique equilibrium when agents are fairly risk averse. In this case, an increase in seigniorage-financed government spending will always be inflationary and detrimental to growth. When agents exhibit a low degree of risk aversion, multiple equilibria emerge and a positive relation between inflation and growth a la Tobin can be observed. Copyright 1999 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Date: 1999
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Related works:
Working Paper: Fiscal and Monetary Policy Interactions in an Endogenous Growth Model with Financial Intermediaries (1998)
Working Paper: Fiscal and monetary policy interactions in an endogenous growth model with financial intermediaries (1995) 
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Persistent link: https://EconPapers.repec.org/RePEc:ier:iecrev:v:40:y:1999:i:3:p:595-615
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