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Volatile public spending in a model of money and sustainable growth

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posted on 11.07.2007, 12:38 by Dimitrios Varvarigos
In a model where seignorage provides the financing instrument for the government’s budget, public spending volatility has an adverse effect on long-run growth. This negative relationship arises because the incidence of volatility in this type of public policy is responsible for higher average money growth, thus induces individuals to devote less time/effort towards capital accumulation. Another implication of the model is that policy variability provides a possible argument behind the positive correlation between inflation and inflation variability.

History

School

  • Business and Economics

Department

  • Economics

Publication date

2007

Notes

This is a working paper. It was also published at: http://ideas.repec.org/p/lbo/lbowps/2007_18.html.

ISSN

1750-4171

Language

en

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