Three Essays on Macroeconomic Dynamics

Abstract

The first chapter explores whether inflation taxation, a substitute for income taxation given fixed government spending, can mitigate business fluctuations, promote growth and enhance welfare by extending the Matsuyama model with endogenous growth through endogenous cycles to incorporate money in the utility function. Numerically, optimal money growth enhances welfare based on calibration. The second chapter determines the social optimal path in the innovation-cycle model of Matsuyama (1999, 2001) and explore whether inflation and taxation can be used to obtain the social optimum under a cash-in-advance constraint. The socially optimal path allows innovation to occur at a lower level of the capital-variety ratio than the equilibrium path. The third chapter extends one of the main findings in Bossmann et al. (2007). Bequest motives per se reduce wealth inequality. We show that the result holds for a stronger criterion of inequality comparison between distributions. Our Lorenz dominance result implies their result.