Strict Fiscal Rules and Macroeconomic Stability: The Case of Social VAT
AbstractThis paper studies the local dynamic properties of a simple general equilibrium model with Social VAT. Strict balanced budget rules often lead to real indeterminacy of aggregate equilibrium, leaving room for «sunspots» fluctuations. In a closed-economy setup, social VAT escapes this property and only reduces the aggregate labor supply elasticity. However, the quantitative effects are weak.
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Bibliographic InfoPaper provided by Banque de France in its series Working papers with number 439.
Length: 17 pages
Date of creation: 2013
Date of revision:
Macroeconomic stability; Social VAT; Labor supply elasticity; Aggregate fluctuations.;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-16 (All new papers)
- NEP-DGE-2013-08-16 (Dynamic General Equilibrium)
- NEP-MAC-2013-08-16 (Macroeconomics)
- NEP-PBE-2013-08-16 (Public Economics)
- NEP-SPO-2013-08-16 (Sports & Economics)
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