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Openness, Bureaucratic Corruption and Public Policy in an Endogenous Growth Model

Rangan Gupta () and Emmanuel Ziramba

No 200817, Working Papers from University of Pretoria, Department of Economics

Abstract: In this paper, we develop a dynamic general equilibrium overlapping generations monetary endogenous growth model of a financially repressed small open economy characterized by bureaucratic corruption, and, in turn, analyze optimal policy decisions of the government following an increase in the degree of corruption. As suggested in the empirical literature, we find that increases in the degree of corruption should ideally result in an increase in the ratio of seigniorage to total revenue, as an optimal response of the benevolent government. In addition, higher degrees of corruption are also found to be accompanied by higher levels of financial repression.

Keywords: Bureaucratic Corruption; Macroeconomic Policy; Openness (search for similar items in EconPapers)
JEL-codes: D73 E63 F43 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2008-06
New Economics Papers: this item is included in nep-dge, nep-mac, nep-opm, nep-pol and nep-reg
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