GROWTH AND INFLATIONARY FINANCE: VARIATIONS ON A MUNDELLIAN THEME

In: Journal of political economy, Band 9, Heft 5, S. 880-887

Abstract

IN THIS PAPER THE AUTHORS WILL SHOW THAT, EXCEPT IN A BORDERLINE CASE, MUNDELL'S MODEL HAS TWO STEADY STATES (INSTEAD OF ONE, AS WAS TAKEN FOR GRANTED) AND THAT THE NUMERICAL EXAMPLES FOCUSED ON THE ONE THAT EXHIBNITS THE LOWEST LEVEL OF REAL MONETARY BALANCES AND GROWTH. IF INSTEAD THE ANALYSIS WERE TO BE BASED ON THE SECOND STEADY STATE, A DRAMATICALLY DIFFERENT RESULT IS FOUND: THERE EXISTS NO UPPER BOUND TO THE STEADY-STATE SEIGNIORAGE-FINANCED RATE OF GROWTH. AND THE LATTER INCREASES WITHOUT BOUND AS THE RATE OF EXPANSION OF THE MONEY SUPPLY. APPROACHES ZERO.