Abstract

VENEGAS MARTINEZ, Francisco. Endogenous growth, money, taxes and foreign debt. Inv. Econ [online]. 1999, vol.59, n.229, pp.15-36. ISSN 0185-1667.

An endogenous growth model is developed to examine the trade-off between raising public foreign debt and sustaining growth. We characterize the perfect foresight macroeconomic equilibrium and determine the optimal rate of monetary growth. The impact of a tight monetary policy on the equilibrium is examined. The key result is that a tight monetary policy accompanied by an increase in the tax rate on income from capital may be inconsistent with economic growth. We analyze the effects of various forms of distortionary taxes on the trade-off. The impact of tax policy on economic welfare is also addressed.

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