We study optimal labor and capital taxation in a dynamic economy subject to government expenditure and aggregate productivity shocks. We relax two assumptions from Ramsey models: that a representative agent exists and that taxation is proportional with no lump-sum tax. In contrast, we capture a...

This paper derives an intertemporal optimality condition for economies with private information, focusing on a class of recursive preferences. By comparing it to the situation where agents can freely save in a risk-free asset market, we derive the optimal savings distortions necessary for...

Over the period 1972-1986, the correlations of GDP, employment and investment betweenthe United States and an aggregate of Europe, Canada and Japan were respectively 0.76,0.66, and 0.63. For the period 1986 to 2000 the same correlations were much lower: 0.26,0.03, and -0.07 (real...

In simple one-good international macro models, the presence of non-diversifiable labor income risk means that country portfolios should be heavily biased toward foreign assets. The fact that the opposite pattern of diversification is observed empirically constitutes the international...

We evaluate the asset pricing implications of a class of models in which risk sharing is imperfect because of the limited enforcement of intertemporal contracts. Lustig (2004) has shown that in such a model the asset pricing kernel can be written as a simple function of the aggregate consumption...

Over the period 1972-1986, the correlations of GDP, employment and investment between the United States and an aggregate of Europe, Canada and Japan were respectively 0.76, 0.66, and 0.63. For the period 1986 to 2000 the same correlations were much lower: 0.26, 0.03, and -0.07 (real...

We analyze the role of fiscal policy in the recent slowdown in Japan. A dynamic general equilibrium model is developed in which fiscal policy can have both expansionary effects (through increasing returns) and contractionary effects (through the increase of public debt and tax burden).

We explore steady-state inequality in an intergenerational model with altruistically linked individuals who experience privately observed taste shocks. When the welfare function depends only on the initial generation, efficiency requires immiseration: inequality grows without bound and...

Abstract We provide a unifying foundation for monetary policy and macroprudential policies in financial markets for economies with nominal rigidities in goods and labor markets and constraints on monetary policy such as the zero lower bound or fixed exchange rates. Macroprudential interventions...

This paper builds a continuous time model of government saving behavior. The model features rulers that rotate out of power. The ruler makes two decisions: a. total spending expenditure; and b. the composition of spending between two goods, one with public benefits and another with private...