Cash-in-advance constraint, optimal monetary policy, and human capital accumulation

Public Investment Financed by Seigniorage and Money Supply Control

“…Because the relationship K t = xG t holds in the steady state, the growth rates of private capital and public capital become equal. Considering (24), the gross economic growth rate, Y t+1 /Y t , is represented by…”

“…Previous studies that are closely related to this study include Crettez et al (2002), Yakita (2008), Maebayashi (2013), and Yanagihara and Lu (2013). All of these studies are characterized by a basic framework that is based on discrete-time overlapping generations (OLG) models a la Diamond (1965).…”

“…All of these studies are characterized by a basic framework that is based on discrete-time overlapping generations (OLG) models a la Diamond (1965). Crettez et al (2002) and Yanagihara and Lu (2013) developed an argument related to public policy that uses seigniorage. However, Crettez et al (2002) focused on public services that affect household utility, while Yanagihara and Lu (2013) emphasized the role of public education spending in human capital formation.…”

“…Crettez et al (2002) and Yanagihara and Lu (2013) developed an argument related to public policy that uses seigniorage. However, Crettez et al (2002) focused on public services that affect household utility, while Yanagihara and Lu (2013) emphasized the role of public education spending in human capital formation. Yakita (2008) considered a situation in which government revenues from income taxes are allocated to new investments in industrial infrastructure and maintenance of infrastructure, and examined the selection of income tax rates to maximize the gross domestic product (GDP) growth rate and the allocation problem in relation to government spending.…”

Monetary rules and fiscal feedback rules

“…Now, it is noteworthy that the overlapping-generations cash-in-advance specification, which is adopted herein too, postulates a Diamond (1965) utility function of consumption when young and consumption when old; and it does so almost uniformly in the relevant literature (see e.g. Yanagihara and Lu, 2013;Gahvari, 2009;Smith, 2003;Crettez et al, 1999;Qi, 1994, and the subsequent literature). Nevertheless, policymaking should be approached under a social planner's viewpoint, and hence, based on a social welfare function incorporating explicitly the standard analytical parable of monetary overlapping-generations modeling according to which the young and the old are two different concurrent generations, with the former altering behavior as they age (see e.g.…”