Abstract
This paper develops a dynamic model which allows for government spending, taxation, and the endogeneity of the money supply. As an example of an application of our framework, we consider the well known stability problem of the two asset (money and physical assets) neoclassical "money-and-growth" literature. We conclude, among other things, that the usual saddle-point instability result under myopic perfect foresight with proportional savings behavior can be reversed by introducing a third asset (securities). It is further argued that this result is "robust" as it holds under various policy rules (including the traditional case of national debt growing at a constant rate).
Original language | English (US) |
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Pages (from-to) | 356-367 |
Number of pages | 12 |
Journal | Journal of Economic Theory |
Volume | 33 |
Issue number | 2 |
DOIs | |
State | Published - Aug 1984 |
Externally published | Yes |
ASJC Scopus subject areas
- Economics and Econometrics