On the stability of a certain Keynes-Metzler‑Goodwin monetary growth model (original) (raw)

Fiscal and Monetary Policy in a Basic Endogenous Growth Model

Computational Economics, 2014

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 government 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 growh effects of a loose debt policy up to a certain point but only at the cost of higher inflation and lower welfare.

Money Supply in a Simple Economic Growth Model and Multiple Steady States Equilibria

2009

We intend to examine a monetary economic growth model à la Sidrauski-Brock where money is introduced both in the utility function and the production function. We assume that utility is derived from the flow of services derived from real money holdings and that money is held by firms to facilitate production. We show that the level of equilibrium depends on the rate of discount. We give conditions to guarantee uniqueness of the equilibrium. We demonstrate that the unique equilibrium is either a classical « saddle point » or a « source point »; that the introduction of money in the utility and production function is sufficient to produce multiple stationary equilibria; and that the initial stock of money appears as an important economic control variable. Therefore, the initial amount of the monetary emission issued by the central bank becomes essential for the long run economic equilibrium properties.

Fiscal and Monetary Policies and Economic Growth

SSRN Electronic Journal, 2000

The paper analyses the way in which monetary and fiscal policy influences the performances of economic growth. The analysis is made on the basis of a dynamic model with discrete variables of the Sidrauski-Brock type, with infinite-lived households and money in the utility function. The model is with a representative private agent and a government sector consisting of a consolidated fiscal authority and central bank. Households receive an exogenous perishable endowment each period, decide about consumption and pay net real lump-sum tax. The state variable of the model is government debt, and the decision variables are: consumption and the amount of money detained by the agent. The optimality conditions are obtained by using the Maximum Principle for discrete dynamic systems. A qualitative analysis of the optimal trajectories is performed, on the basis of the information provided by the Maximum Principle, concerning the dynamics of the dual variable and the properties of the Lagrange multipliers. Finally, we analyze the influence of several monetary and fiscal decisions on the optimal trajectories and on the performance-function of the model.

On the effectiveness of monetary and fiscal policies in a Keynesian model

European Economic Review, 1983

One of the central problems in macroeconomics is the comparison of the effectiveness of various monetary and fiscai policy measures for regulating output and employment. Opinions on this issue are qui& varied. This paper analyses this controversy in the framework of a non-Walrasian mod.el with price rigidities. It studies a monetary economy where money is the sole medium of exchange in the model 'money buys goods and goods buy money; but goods do not buy goods'. The works of Benassy, Druze, Malinvaud and Younes are urilised fi>r constructing 1 model of Keynesian unemployment equilibrium.

Fiscal policy and fluctuations in a monetary model of growth

Research in Economics, 2005

We consider an infinite horizon economy with representative agent, aggregate externalities on capital/labor ratio and liquidity constraint on income taxes. We show that the stationary rate of growth can be indeterminate for a wide range of elasticities of intertemporal substitution in consumption. Such a range is bounded from below by a value undergoing a saddle node bifurcation and from above by a value giving raise to a flip bifurcation. It follows that both multiple stationary rates of growth and cycles may emerge. In addition, we carry out a welfare analysis in terms of the optimal level of taxation, since public spending affects consumer utility, although in a separable way.

Monetary Growth, Inflation, and Economic Activity in a Dynamic Macro Model

International Economic Review, 1987

This paper analyzes the effccts of an increase in the monetary growth rate within a dynamic optimizing macroeconomic model. Both the short-run and long-run effects, and therefore the adjustments along the transitional path, depend critically upon the tax structure and the firm's corresponding optimal financial decisions. With all bond financing, the effects depend upon the extent to which interest payments are tax deductible for corporations. If this is sufficiently high, the effects of an increase in the monetary growth rate are generally expansionary. With low interest deductibility, or if the tax structure induces equity financing, the effects are generally contractionary.

The Effects of Fiscal Policy in a Neoclassical Growth Model

SSRN Electronic Journal, 2000

*We would like to thank Mary Finn, Marvin Goodfriend, Robert King, and especially Alan Stockman for many helpful comments. The views expressed here are those of the authors and do not necessarily represent those of the Federal Reserve Bank of Richmond nor the Federal Reserve System.