OPTIMAL GOVERNMENT FINANCE AND DEMOCRACY IN DEVELOPING COUNTRIES

Renee D. Nieberding ()
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Renee D. Nieberding: The Ohio State University

Journal of Economic Development, 2004, vol. 29, issue 2, 131-148

Abstract: Optimal government finance models illustrating trade-offs between different policy instruments, such as seigniorage and income taxes, have focused on industrialized countries. In this paper, a model that includes the effective reserve ratio and currency growth rate as instruments is derived from a welfare loss function and is estimated using fixed effects for a sample of 29 developing countries. The results indicate that the governments in the sample use the reserve requirement to minimize the welfare losses associated with seigniorage revenue. Mid-level democracies are associated with the highest effective reserve ratios.

Keywords: Reserve Ratio; Currency Growth; Seigniorage; Democracy (search for similar items in EconPapers)
JEL-codes: E6 H2 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:jed:journl:v:29:y:2004:i:2:p:131-148

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