This paper incorporates the effect of the central bank's independence into the government's optimum financing model. When the implications of the hypotheses are tested for eighteen OECD countries, this paper shows that countries with higher levels of central bank independence generate less...

I develop a small open endogenous growth model with domestic and foreign intermediate goods. The Marshallian external economies in the domestic intermediate goods sector work as the engine of sustained growth. The model offers two arguments. First, imposing a trade distortion is growth- and...

This paper reconsiders the case for the use of fiscal policy based on a "functional finance" approach that advocates the use of fiscal policy to secure high levels of demand in the context of private aggregate demand, which would otherwise be too low. This "functional finance" view means that...