Crowding in or Crowding out in a Tobinian Model: A Note on the Economic Conse¬quences of Financing Government Deficits when Money Supply is Endogenous

This paper presents a Tobin type model of the financial sector with markets for equities, government bonds and money and explores the effects of alternative fiscal, financial and monetary policies on the level and fluctuations of economic activity in the presence of an endogenous money supply. The short-run comparative statirs suggest that financial deficit need not crowd out any investment and that a decrease in the rate of interest on government bonds does not imply an unambiguously positive effect on the aggregate demand.