The US tax code stipulates taxation of capital income at the firm level (corporate profits) and at the household level (dividends and capital gains). Even though all of those are capital income taxes, they have different effects both on incentives for household savings and firm investment and in...

This paper studies optimal policy in models with multidimensional uncertainty and endogenous observables. We first consider a very general setup where the policy-maker does not observe the realisations of the shocks that hit the economy, but only some aggregate variables that are endogenous with...