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Dynamic Aspect of Growth and Fiscal Policy

Krichel, T and Levine, P Dynamic Aspect of Growth and Fiscal Policy .

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We develop an endogenous growth model driven by externalities of both private capital and public infrastructure. The government levies distortionary taxation to finance a publicly provided consumption good and public infrastructure. Firms face adjustment costs. We first study the steady state, focusing in detail on the non-Ricardian aspects of the model. We then examine the optimal and time-consistent policies in a linear-quadratic approximation of the model. Although the time consistent equilibrium is also sub-optimal in terms of steady-state welfare, it does yield higher growth, through an accumulation of assets by the state and a cut of government consumption.

Item Type: Other
Divisions : Surrey research (other units)
Authors :
Krichel, T
Uncontrolled Keywords : C61, E21, E23, E62, O41, endogenous growth, fiscal policy, time inconsistency.
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 15:14
Last Modified : 23 Jan 2020 10:25

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