Fiscal and monetary policy in a basic endogenous growth model

Greiner A (2013) Bielefeld Working Papers in Economics and Management, 10.
Bielefeld: Bielefeld University, Department of Business Administration and Economics.

Working Paper | Published | English

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Abstract
We present a monetary endogenous growth model and analyze the effects of fiscal and monetary policy with real money as an argument in the utility function. We show that a balanced government budget gives a higher balanced growth rate and lower inflation than a situation with permanent public deficits. It also leads to higher welfare compared to a situation with permanent deficits where the overnment does not put a high weight on stabilizing debt. However, when governments run deficits with a high weight on stabilizing debt, comparative welfare effects depend on the initial conditions with respect to public debt. Further, for a given monetary policy a stricter debt policy yields higher growth, lower inflation and higher welfare. A rise in the nominal money supply can compensate the negative growth effects of a loose debt policy up to a certain point but only at the cost of higher inflation and lower welfare.
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Greiner A. Fiscal and monetary policy in a basic endogenous growth model. Bielefeld Working Papers in Economics and Management, 10. Bielefeld: Bielefeld University, Department of Business Administration and Economics; 2013.
Greiner, A. (2013). Fiscal and monetary policy in a basic endogenous growth model (Bielefeld Working Papers in Economics and Management, 10). Bielefeld: Bielefeld University, Department of Business Administration and Economics.
Greiner, A. (2013). Fiscal and monetary policy in a basic endogenous growth model. Bielefeld Working Papers in Economics and Management, 10, Bielefeld: Bielefeld University, Department of Business Administration and Economics.
Greiner, A., 2013. Fiscal and monetary policy in a basic endogenous growth model, Bielefeld Working Papers in Economics and Management, 10, Bielefeld: Bielefeld University, Department of Business Administration and Economics.
A. Greiner, Fiscal and monetary policy in a basic endogenous growth model, Bielefeld Working Papers in Economics and Management, 10, Bielefeld: Bielefeld University, Department of Business Administration and Economics, 2013.
Greiner, A.: Fiscal and monetary policy in a basic endogenous growth model. Bielefeld Working Papers in Economics and Management, 10. Bielefeld University, Department of Business Administration and Economics, Bielefeld (2013).
Greiner, Alfred. Fiscal and monetary policy in a basic endogenous growth model. Bielefeld: Bielefeld University, Department of Business Administration and Economics, 2013. Bielefeld Working Papers in Economics and Management, 10.
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