Fernández, Andrés; Guzman, Daniel; Lama, Ruy; Vegh, … - 2023
To explain the fact that government spending and tax policy are procyclical in emerging and developing countries, we … develop a model for the joint behavior of optimal tax rates and government spending over the business cycle. Our set-up relies … theoretical result within a simple static framework: incomplete markets can account for procyclical government spending but not …