This paper uses a model of managers' behavior under uncertainty to analyze the effects of limited liability of optimal profits taxes. In particular, it addresses the question of whether the benefits of limited liability should be taxed. The authors show that an increase in profits taxation...

Recent literature on cointegration and unit roots has focused attention on the distribution of test statistics frequently used to test efficiency in rational expectations models. This paper concentrates on the permanent income hypothesis of real consumption. The authors illustrate, by using the...