Optimal Tax Policy, Government Myopia and Insolvency
AbstractThis paper explores the relationship between the myopia, the solvency and the reputation of a government choosing the optimal financing policy given a particular path of government spending. A central result is the demonstration of a logical link between government myopia and insolvency in the sense that there is a class of models for which a solution to the optimal taxation problem does not exist. Results are shown analytically for a very simple non-monetary economy, for a seigniorage model examined by Obstfeld and, using simulations, for a more developed non-Ricardian model with capital.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 768.
Date of creation: May 1993
Date of revision:
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Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
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- Krichel, Thomas, 1993.
"Seigniorage, taxation and myopia in EMU,"
4472, University Library of Munich, Germany.
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