Pecking order theory for government finance

Anton Miglo

MPRA Paper from University Library of Munich, Germany

Abstract: In this article we argue that asymmetric information can explain why seignorage is an inferior choice to debt for governments. We also argue that the Ricardian equivalence for governments is very similar to what the Modigliani-Miller proposition is for corporations. Our model is based on Bolton and Huang (2018) in that money for governments is similar to what equity is for corporations. In contrast to their model, our model considers rational economic agents.

Keywords: government finance; pecking order; capital structure; money; Ricardian Equivalence; Modigliani-Miller Proposition; asymmetric information (search for similar items in EconPapers)
JEL-codes: D82 D86 E40 E51 E52 E63 G32 (search for similar items in EconPapers)
Date: 2004, Revised 2018
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:89017

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