Relationship Among Reserve Ratio, Government Spending and Economic Growth

Abstract: The relationship among reserve ration, government spending and economic growth was analyzed. A
monetary endogenous growth model is well developed by taking into account the growth-enhancing effects of re
serve-augmenting seigniorage. If the government spends all the seigniorage revenue on the provision of a public input
which has positive extemality on the private sector's production, some results to be utterly different from Bronx's have
been obtained: the economy has a unique saddle-balanced growth path, but it has nothing to do with reserve ratio
However, the higher reserve ratio, the faster speed of economic convergence.
Key words: economic growth; government spending: seigniorage revenue; reserve ratio