Essays on intertemporal money and public finance
This dissertation studies the intertemporal relation between money and taxation from several perspectives. The first essay explores the quantitative macroeconomic effects of monetary taxation--the fact that money is the required means of taxation payment. Based on three model economies exhibiting growth in their deterministic steady states, it shows that inflation has greater effects on growth and welfare than those found in existing monetary models. Inflation reduces directly the net-of-all-tax real rate of return on investment. At business cycle frequencies, monetary taxation does not cause a deterioration in the ability of the model to mimic key aspects of U.S. fluctuations; but it does not match the correlation of hours worked and productivity and the relative volatility of hours. The essay provides a "monetary" solution to these anomalies with the introduction of a liquidity effect. The second essay extends from a theoretical viewpoint the standard cash-in-advance framework by integrating the fiscal sector. Its distinctive characteristic is that taxes have to be paid with fiat money accumulated in advance. The effect of taxes on asset pricing and velocity of money is studied when this tax payment technology is imposed. Also, tax incidence in a monetary economy is considered through the effect of tax reforms and fluctuations in uncertainty about future tax reforms on asset prices. The last essay specializes, derives the empirical implications, and tests a model of optimal government financial behavior. To finance its expenditures, a government is assumed to follow a financing policy in which taxes, central bank credit, and revenues obtained from the price costs brought about by the use of distortionary taxation. If inflation, devaluation and tax rates are explained by this theory, these variables must exhibit some intra and intertemporal properties. Theory predicts that they must follow stochastic nonstationary processes, covary positively with each other and with the government expenditure rate. Evidence from Colombia showed that all the implications were valid. The long-run behavior of these time series is determined by the government's financing needs.
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|Authors:||Suescun, Rodrigo de Jesus|
|Type of publication:||Other|
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