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Optimal Government Finance And Democracy In Developing Countries

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  • Renee D. Nieberding

    (The Ohio State University)

Abstract

Optimal government finance models illustrating trade-offs between different policy instruments, such as seigniorage and income taxes, have focused on industrialized countries. In this paper, a model that includes the effective reserve ratio and currency growth rate as instruments is derived from a welfare loss function and is estimated using fixed effects for a sample of 29 developing countries. The results indicate that the governments in the sample use the reserve requirement to minimize the welfare losses associated with seigniorage revenue. Mid-level democracies are associated with the highest effective reserve ratios.

Suggested Citation

  • Renee D. Nieberding, 2004. "Optimal Government Finance And Democracy In Developing Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 29(2), pages 131-148, December.
    • Handle: RePEc:jed:journl:v:29:y:2004:i:2:p:131-148
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    References listed on IDEAS

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    Cited by:

    1. Harrison Oluchukwu Okafor, 2013. "Estimating the Costs and Benefits of a Common Currency for the Second West African Monetary Zone (WAMZ)," Journal of Economics and Behavioral Studies, AMH International, vol. 5(2), pages 57-68.
    2. Joao Tovar Jalles, 2011. "The Impact Of Democracy And Corruption On The Debt-Growth Relationship In Developing Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 36(4), pages 41-72, December.

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    More about this item

    Keywords

    Reserve Ratio; Currency Growth; Seigniorage; Democracy;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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