Alternative government financing and stochastic endogenous growth. (Q5958359): Difference between revisions

This paper addresses a stochastic endogenous model, in which the stock of securities, both money and bonds, are required to finance the government budget. We study how the expected rate of real growth, the expected inflation rate and economic welfare are influenced by changes in the first and second moments of public spending. The analyses will enable us to assess the merits and demerits of mixed financing case of money and bonds relative to financing one of taxes on wealth examined in \textit{E. L. Grinols} and \textit{S. J. Turnovsky} [J. Econom. Dyn. Control 17, 1--36 (1993)] and \textit{S. J. Turnovsky} [Int. Econom. Rev. 34, 953--981 (1993)]. In addition, we construct a model where government relies on a larger ratio of bonds to money to raise the necessary revenue and show how the consequences of mixed financing are affected by the policy decision of government.