O. J. Blanchard's (1985) formulation of the overlapping-generations model and the social welfare function advocated by G. Calvo and M. Obstfeld (1988) are used to analyze interest taxation and tariffs in a small open economy. When the revenue lost from the elimination of these taxes is replaced...

Two policies that are intended a s built-in stabilizers are examine d: countercyclical tax adjustments and schemes that increase wage and price flexibility. The analysis involves rational expectations, policy expectations effects, and a short-run Phillips curve whose slope varies with changes in...