WELFARE-MAXIMIZING OPERATIONAL MONETARY AND TAX POLICY RULES

This paper computes welfare-maximizing monetary and tax policy feedback rules in acalibrated dynamic general equilibrium model with sticky prices. The government makesexogenous final good purchases, levies a proportional income tax, and issues nominalone-period bonds. A quadratic approximation method is used to solve the model and tocompute household welfare. Optimized policy has a strong anti-inflation stance andimplies persistent fluctuations of the tax rate and of public debt. Very simple optimizedpolicy rules, under which the interest rate just responds to inflation and the tax rate justresponds to public debt, yield a welfare level very close to that generated by richer rules.[...]

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Year of publication:	2008-01-24
Authors:	Kollmann, Robert Miguel W. K.
Institutions:	Centre for Economic Policy Research <London>
Published in:	London School of Economics and Political Science - Publications Macroeconomic Dynamics, 12 (Supplement 1), 2008, 112–125
Subject:	Geldpolitik \| Fiskalpolitik \| Steuerpolitik \| Tax Policy \| Inflation \| Wohlfahrt \| Welfarism

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Extent:	1024 bytes 14 p. application/pdf
Type of publication:	Article
Language:	English
Classification:	E5 - Monetary Policy, Central Banking and the Supply of Money and Credit ; E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook ; H6 - National Budget, Deficit, and Debt ; Strategic management ; Sociological and psychological aspects ; Financial theory ; Individual Articles ; No country specification
Source:	USB Cologne (business full texts)

Persistent link: https://www.econbiz.de/10009138469