Endogenous inflationary finance and long-run growth

Sugata Ghosh, Iannis A. Mourmouras

    Research output: Contribution to journalArticlepeer-review


    This paper examines the effects of money financing of deficits on capital accumulation and growth in a framework where inflationary finance is determined endogenously through a dynamic game between an optimising central bank which attempts to minimise the inflation-tax and a rational private sector, and this in turn determines the long-run growth rate of the economy. We use dynamic programming to derive the time-consistent equilibrium, which has intuitive properties. Our results indicate clearly that the inflation tax and the long-run growth rate are negatively related. © MCB University Press.

    Original languageEnglish
    Pages (from-to)43-54
    Number of pages12
    JournalJournal of Economic Studies
    Issue number1
    Publication statusPublished - 2001


    • Economic growth
    • Finance
    • Inflation


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