Risk, Optimal Government Finance, and Monetary Policies in a Growing Economy

E-L Grinols and Stephen J Turnovsky

Working Papers from University of Washington, Department of Economics

Abstract: Optimal tax and monetary policies in a stochastic monetary growth model are investigated. Our findings are of three general types. First, both capital income taxes and monetary growth are shown to influence the economy through effective risk adjusted measures, expressed as a linear function of their respective means and variances. Second, two stochastic netrality results relating to money and bonds, the two nominal assets in the economy, are identified. Third optimal policy rules relating to taxes, bond finance, and money creation are characterized. An essential component of optimal financial policy is a risk-adjusted balanced budget.

Keywords: RISK; ECONOMIC GROWTH; MONETARY POLICY; TAXATION; ECONOMIC MODELS (search for similar items in EconPapers)
JEL-codes: E52 H21 O41 (search for similar items in EconPapers)
Pages: 31 pages
Date: 1997
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Risk, Optimal Government Finance and Monetary Policies in a Growing Economy (1998)
Working Paper: Risk, Optimal Government Finance, and Monetary Policies in a Growing Economy (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:udb:wpaper:97-10

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