Variation 5: Differentiated goods, multiple means of payment, and alternative specifications of government activities

  • Leopold von Thadden
Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 479)


In the previous two chapters, our treatment of government activities in our discussion of economies subject to various cash-in-advance constraints has been rather crude. However, in this chapter we present more detailed specifications of some government activities, and it turns out that modifications both of the revenue and the expenditure side of the government’s budget constraint can substantially change the interaction of inflation and capital formation. We use the framework introduced in chapter 8, and to keep the analysis as transparent as possible we concentrate on constellations with an ‘exogenous cash-in-advance constraint’. Two specifications of this set-up are considered.


Monetary Policy Capital Stock Fiscal Policy Public Capital Substitution Effect 
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Copyright information

© Springer-Verlag Berlin Heidelberg 1999

Authors and Affiliations

  • Leopold von Thadden
    • 1
  1. 1.Deutsche BundesbankHauptabteilung VolkswirtschaftFrankfurt/MainGermany

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