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Business Cycle Dynamics of a New Keynesian Overlapping Generations Model with Progressive Income Taxation

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Author Info
Burkhard Heer ()
Alfred Maussner ()

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Abstract

In our dynamic optimizing sticky price model, agents are heterogeneous with regard to their age and their productivity. We find that the business cycle dynamics in the OLG model in response to both a technology shock and a monetary shock are similar, but not completely identical to those found in the corresponding representative-agent model. In particular, working hours in the OLG model decrease in response to a positive technological shock, since for young workers the income effect dominates the substitution effect. This is in line with the adverse effect of productivity shocks on employment found in structural vector autoregressions.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1692.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1692

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Related research
Keywords: fluctuations; unanticipated inflation; wealth distribution; income distribution; progressive income taxation; Calvo price staggering;

Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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