Fiscal policy and fluctuations in a monetary model of growth
AbstractWe consider an infinite horizon economy with representative agent, aggregate externalities on capital/labor ratio and liquidity constraint on income taxes. We show that the stationary rate of growth can be indeterminate for a wide range of elasticities of intertemporal substitution in consumption. Such a range is bounded from below by a value undergoing a saddle node bifurcation and from above by a value giving raise to a flip bifurcation. It follows that both multiple stationary rates of growth and cycles may emerge. In addition, we carry out a welfare analysis in terms of the optimal level of taxation, since public spending affects consumer utility, although in a separable way.
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Bibliographic InfoArticle provided by Elsevier in its journal Research in Economics.
Volume (Year): 59 (2005)
Issue (Month): 2 (June)
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Web page: http://www.elsevier.com/locate/inca/622941
Other versions of this item:
- Stefano Bosi & Francesco Magris, 2005. "Fiscal Policy and Fluctuations in a Monetary Model of Growth," Documents de recherche 05-02, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
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