This paper demonstrates, for a two-good, two-country model with finitely-lived agents, the possibility of using national debt as a policy instrument to improve welfare via an improvement in the terms of trade. The latter is large enough to outweigh the negative effect of crowding out of capital...

This paper examines the effects of money financing of deficits on capital accumulation and growth in a framework where inflationary finance is determined endogenously through a dynamic game between an optimising central bank which attempts to minimise the inflation-tax and a rational private...