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- W2098128449 abstract "In some Business-Cycle models a fiscal policy that sets income taxes counter cyclically can cause macroeconomic instability by giving rise to multiple equilibria and as a result to fluctuations caused by self fulfilling expectations. This paper shows that consolidated budget rules with endogenous income-tax rates can be stabilizing if they exhibit monetary dominance, where monetary policy manages expectations by implementing an active interest rate rule. This result is robust for plausible degrees of externalities in production. The size of the government, however, plays a key role in the degree of activeness that the monetary authority should exhibit in order to stabilize the economy. If government spending are not too large relative to private consumption, a neutral monetary policy [such that the real rate of interest is constant in and off the steady state] is also stabilizing" @default.
- W2098128449 created "2016-06-24" @default.
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- W2098128449 date "2010-07-01" @default.
- W2098128449 modified "2023-09-27" @default.
- W2098128449 title "Consolidated-Budget Rules and Macroeconomic Stability with Income-Tax and Finance Constraints" @default.
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