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- W3123040786 abstract "I study the implications of recursive utility, a popular preference specification in macro-finance, for the design of optimal fiscal policy. Standard Ramsey tax-smoothing prescriptions are substantially altered. The planner over-insures by taxing less in bad times and more in good times, mitigating the effects of shocks. At the intertemporal margin, there is a novel incentive for introducing distortions that can lead to an ex-ante capital subsidy. Overall, optimal policy calls for a much stronger use of debt returns as a fiscal absorber, leading to the conclusion that actual fiscal policy is even worse than we thought." @default.
- W3123040786 created "2021-02-01" @default.
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- W3123040786 date "2018-01-22" @default.
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- W3123040786 title "Optimal Fiscal Policy with Recursive Preferences" @default.
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- W3123040786 doi "https://doi.org/10.1093/restud/rdy005" @default.
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