Fiscal and Monetary Policy in an Endogenous Growth Model with Public Capital

Toshiki Tamai

FinanzArchiv: Public Finance Analysis, 2008, vol. 64, issue 4, 403-421

Abstract: This paper develops an endogenous growth model in which the government finances its public investment using both income taxation and seigniorage. Arguments presented in this paper show that public investment financed by seigniorage gradually pulls up the growth rate of consumption and overshoots the inflation rate. Furthermore, we show that public investment financed by an income tax brings about an overshooting of the inflation rate and a simultaneous undershooting of the growth rate of consumption. These dynamic effects influence welfare dynamics. Taking account of transitional effects, we derive the welfare effects of fiscal and monetary policy.

Keywords: fiscal policy; monetary policy; economic growth; welfare (search for similar items in EconPapers)
JEL-codes: H54 O11 O23 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:mhr:finarc:urn:sici:0015-2218(200812)64:4_403:fampia_2.0.tx_2-b

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DOI: 10.1628/001522108X397606

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