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Tax Policy and Stability in a Model with Sector-Specific Externalities

Guo, Jang-Ting; Harrison, Sharon G. - In: Review of Economic Dynamics 4 (2001) 1, pp. 75-89

We show that in a two-sector real business cycle model wtih sufficiently strong investment externalities, a regressive tax policy can stabilize the economy against fluctuations driven by agents' animal spirits. By contrast, this economy with a flat or progressive tax scheme (such as that in the...

Persistent link: https://www.econbiz.de/10005091021

Growth and Welfare Effects of Business Cycles in Economies with Idiosyncratic Human Capital Risk

Krebs, Tom - In: Review of Economic Dynamics 6 (2003) 4, pp. 846-868

the growth and welfare effects of business cycles. The analysis is based on the assumption that the elimination of … degree of risk aversion is less than or equal to one, then economic growth is enhanced. This paper also provides a … effects on investment in physical and human capital, economic growth, and welfare. (Copyright: Elsevier) …

Persistent link: https://www.econbiz.de/10005090983

Fluctuations in Convex Models of Endogenous Growth I: Growth Effects

Jones, Larry E.; Manuelli, Rodolfo E.; Siu, Henry E.; … - In: Review of Economic Dynamics 8 (2005) 4, pp. 780-804

Is there a trade-off between fluctuations and growth? The empirical evidence is mixed, with some studies finding a … the long run growth rate and to identify important factors determining this relationship in a convex endogenous growth … model. Qualitatively, we show that the relationship between volatility in fundamentals (or policies) and mean growth can be …

Persistent link: https://www.econbiz.de/10005091018

Expectations vs. Fundamentals- driven Bank Runs: When Should Bailouts be Permitted?

Keister, Todd; Narasiman, Vijay - In: Review of Economic Dynamics

Should policy makers be permitted to intervene during a financial crisis by bailing out financial institutions and their investors? We study this question in a model that incorporates two competing views about the underlying causes of these crises: self-fulfilling shifts in investors'...

Persistent link: https://www.econbiz.de/10011262701

The dynamics of public investment under persistent electoral advantage

Azzimonti, Marina - In: Review of Economic Dynamics

This paper studies the effects of asymmetries in re-election probabilities across parties on public policy and their subsequent propagation to the economy. The struggle between groups that disagree on targeted public spending (e.g., pork) results in governments being endogenously short-sighted:...

Persistent link: https://www.econbiz.de/10010945604

The Inflation Tax in an Open Economy with Imperfect Competition

Arseneau, David - In: Review of Economic Dynamics 10 (2007) 1, pp. 126-147

This paper studies the national welfare maximizing inflation tax in an open economy with imperfect competition. It shows that the presence of a monopolistic distortion dampens the incentive to engage in strategic use of the inflation tax. If this dampening effect is strong enough, monetary...

Persistent link: https://www.econbiz.de/10005091034

Default, Reputation and Balanced-Budget Rules

Stockman, David R. - In: Review of Economic Dynamics 7 (2004) 2, pp. 382-405

Is a balanced-budget rule compatible with a government honoring its debt obligations? According to the conventional explanation, governments honor their debt obligations to maintain a good reputation for future borrowing. The ability of borrowing is desirable because it allows for greater tax...

Persistent link: https://www.econbiz.de/10005085573

Optimal Fiscal and Monetary Policy with Sticky Wages and Sticky Prices

Chugh, Sanjay K. - In: Review of Economic Dynamics 9 (2006) 4, pp. 683-714

money creation. Our main result is that sticky wages alone make price stability optimal in the face of shocks to the …

Persistent link: https://www.econbiz.de/10005069605

Reputation in a Model with a Limited Debt Structure

Manzano, Begona Dominguez - In: Review of Economic Dynamics 8 (2005) 3, pp. 600-622

This paper studies the optimal management of the maturity of government debt in an economy without commitment. We consider a reputation where any deviation triggers reversion to the worst sustainable equilibrium. We obtain two results. First, contrary to earlier literature, we show that a very...

Persistent link: https://www.econbiz.de/10005069624

Markov-Perfect Optimal Taxation

Ortigueira, Salvador - In: Review of Economic Dynamics 9 (2006) 1, pp. 153-178

In this paper we study optimal taxation in a dynamic game played by a sequence of governments and a private sector composed of a continuum of households. We focus on the Markov-perfect equilibrium of this game under two different assumptions on the extent of government's intra-period commitment,...

Persistent link: https://www.econbiz.de/10005069643