Further theoretical and empirical evidence on money to growth relation

This paper proposes a theoretical growth model where seigniorage can be used to finance productive public spending, and show the existence of nonlinear effects between seigniorage and economic growth. Empirical evidence based on panel regression techniques provides some support for these nonlinear effects on a sample of OECD countries over the 1978-2005 period.

Further Theoretical and Empirical Evidence on Money to Growth Relation

This paper proposes a theoretical growth model where seigniorage can be used to finance productive public spending, and show the existence of nonlinear effects between seigniorage and economic growth. Empirical evidence based on panel regression techniques provides some support for these nonlinear effects on a sample of OECD countries over the 1978-2005 period.http://deepblue.lib.umich.edu/bitstream/2027.42/64352/1/wp909.pd

Monetary Policy and Inflation Divergences in a Heterogeneous Monetary Union

It is widely recognized that the Euro area is an asymmetric monetary union which assembles countries with heterogeneous structures on financial, goods and labour markets stricken by asymmetric shocks. However, the main objective of the European Central Bank (ECB) is to preserve price stability for the euro area as a whole, and the ECB pays most of its attention to union-wide output and (principally) inflation, neglecting, at least on the level of principles, inflation and output divergences in union. In this paper, we wonder, at a theoretical level, about the social loss associated with such an objective based on aggregate magnitudes, and we search for solutions, namely an “optimal” contract for a common central bank. We show in particular that it is not necessarily a good thing that a common central bank worries about inflation divergences without being concerned about output divergences in union.Monetary Policy ; Monetary Union ; Heterogeneity, Optimal Contract ; Inflation Divergences

Further Theoretical and Empirical Evidence on Money to Growth Relation

This paper proposes a theoretical growth model where seigniorage can be used to finance productive public spending, and show the existence of nonlinear effects between seigniorage and economic growth. Empirical evidence based on panel regression techniques provides some support for these nonlinear effects on a sample of OECD countries over the 1978-2005 period.economic growth, nonlinear effects of monetary policy

Deficit, Seigniorage and the Growth Laffer Curve in developing countries

The endogenous growth literature has established the existence of an inverted-U curve between taxes and economic growth, namely a Growth Laffer Curve (GLC). We develop a growth model with public investment as the engine of perpetual growth, and look for the effect of deficit, tax and money financing on economic growth. We study in particular the way fiscal and monetary policies (through deficit and seigniorage respectively) deform the GLC. An empirical section based on a panel of developing countries provides GMM-system estimators that support our theoretical conclusions.Growth Laffer Curve, deficit, seigniorage, developing countries, GMM, panel data

Dette publique, croissance et bien-être : une perspective de long terme

We develop a simple theoretical growth model to deal with long term public debt, in accordance to stylized facts. We study the effect of a permanent increase in public debt on economic growth, and show that these effects, always negative (or neutral), depend in their magnitude on the adjustment variable to the increase of the debt burden in the Government constraint. Finally, we show that, contrary to economic growth effects, the welfare effects of a permanent increase in the debt burden may be positive. We thus emphasize the existence of an optimal public debt to GDP ratio.Nous proposons un modèle théorique simple permettant de prendre en compte l'existence de régimes d'endettement de long terme, en accord avec les faits saillants observés en longue période. Nous nous intéressons particulièrement aux effets d'une hausse permanente de la dette publique sur la croissance à long terme, et nous montrons que ces effets, toujours négatifs (on nuls), dépendent dans leur ampleur de la variable d'ajustement à la charge de la dette dans la contrainte budgétaire de l'Etat. Enfin, nous montrons qu'au contraire des effets sur la croissance, les effets sur le bien-être à long terme d'une hausse permanente de la dette publique peuvent être positifs. Nous en déduisons l'existence d'un seuil optimal pour le ratio de dette publique au PIB

Monetary policy transmission asymmetries in a heterogeneous monetary union: a simple contractual solution

In this paper, we show that imposing linear penalties on inflation and income divergences to a common central bank could be an interesting solution to stabilization problems in a heterogeneous monetary Union. We find an “optimal contract†for monetary policy which enforces the optimal solution for maximizing Union-wide welfare. This contract may provide a good institutional response to stabilization problems raised by monetary policy transmission asymmetries, as described in De Grauwe & Senegas (2004).

DÉVELOPPEMENT FINANCIER, QUALITÉ INSTITUTIONNELLE ET CROISSANCE : UN MODÈLE SIMPLE AVEC EFFETS DE SEUIL

Dans les analyses empiriques, la « qualité institutionnelle » semble être une variable déterminante pour établir le sens de la relation entre finance et croissance. Ainsi, Demetriades et Law (2004) montrent que le développement financier exerce un effet favorable sur la croissance lorsque les institutions sont saines, alors que cette corrélation disparaît si les institutions sont altérées. Dans cet article, nous tentons de reproduire ce fait saillant dans un modèle de croissance endogène. Dans notre modèle, lorsque la qualité institutionnelle dépasse un certain seuil, la relation entre finance et croissance est positive, alors qu’en deçà du seuil, elle devient négative. Ce résultat s’explique de la manière suivante : le développement financier abaisse les coûts de transaction sur l’investissement privé, mais réduit également les recettes de seigneuriage utilisables pour les investissements publics. Par conséquent, il est favorable à la croissance seulement si d’autres recettes publiques peuvent être utilisées pour financer les investissements publics, donc si la qualité institutionnelle est suffisante pour permettre de collecter des impôts autrement que par taxe inflationniste. Au contraire, si la qualité institutionnelle est trop faible, la perte de recettes de seigneuriage ne peut être compensée par la collecte de nouveaux impôts, et les infrastructures nécessaires au développement ne peuvent être programmées. Abstract - Empirical studies outline the importance of the “institutional quality” in the relation between finance and growth. Demetriades and Law (2004) show that financial development has a positive effect on economic growth when institutions are “sound”, while this correlation disappears if institutions are “poor”. The goal of this paper is to reproduce this result in an endogenous growth model. In our setup, when institutional quality exceeds a certain threshold, the relation between finance and growth is positive, while negative below. This result may be explained by the fact that financial development weakens transaction costs on private investment, but also reduces seigniorage resources for public investment. Consequently, financial develop-ment is growth-enhancing if other resources may be used to finance public investment, namely if the institutional quality is sufficient to allow for collecting public resources other than inflation tax. Conversely, in case of poor institutional quality, the loss of seigniorage revenues cannot be compensated by collecting new taxes, and development-enhancing infrastructures cannot be carried out.CROISSANCE ENDOGÈNE, EFFETS DE SEUIL, POLITIQUE MONÉTAIRE, DÉVELOPPEMENT FINANCIER, POLITIQUE FISCALE, INSTITUTIONS

Deficit, Seigniorage and the Growth Laffer Curve in developing countries

The endogenous growth literature has established the existence of an inverted-U curve between taxes and economic growth, namely a Growth Laffer Curve (GLC). We develop a growth model with public investment as the engine of perpetual growth, and look for the effect of deficit, tax and money financing on economic growth. We study in particular the way fiscal and monetary policies (through deficit and seigniorage respectively) deform the GLC. An empirical section based on a panel of developing countries provides GMM-system estimators that support our theoretical conclusions