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Inflationary Financing of Government Expenditure in an Endogenous Growth Model
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Tapio Palokangas
Published/Copyright:
November 30, 2019
Abstract
This paper analyses the role of inflation in economies with endogenous growth and congestion in public services. Optimal policy rules are derived for public services and investment. The other findings are as follows. Monetary policy should maximize economic growth. The more inefficient the public sector is, the higher the growth-maximizing inflation rate is. If a currency union accepts a new member with an inefficient public sector, this will boost inflation in the union and decrease growth and welfare in all member economies of the union.
Published Online: 2019-11-30
Published in Print: 2003-02-01
© 2019 by Walter de Gruyter Berlin/Boston
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Articles in the same Issue
- Economic Development, Trade and Wages
- Reform Unleashed Korean Growth
- Beyond Flying Geese: The Expansion of East Asia’s Electronics Trade
- Walrasian General Equilibrium Allocations and Dynamics in Two-Sector Growth Models
- The Distributional Effects of International Fragmentation
- Inflationary Financing of Government Expenditure in an Endogenous Growth Model
