Advanced Search
MyIDEAS: Login to save this paper or follow this series

Consolidated-Budget Rules and Macroeconomic Stability with Income-Tax and Finance Constraints

Contents:

Author Info

Abstract

In some Business-Cycle models a fiscal policy that sets income taxes counter cyclically can cause macroeconomic instability by giving rise to multiple equilibria and as a result to fluctuations caused by self fulfilling expectations. This paper shows that consolidated budget rules with endogenous income-tax rates can be stabilizing if they exhibit monetary dominance, where monetary policy manages expectations by implementing an active interest rate rule. This result is robust for plausible degrees of externalities in production. The size of the government, however, plays a key role in the degree of activeness that the monetary authority should exhibit in order to stabilize the economy. If government spending are not too large relative to private consumption, a neutral monetary policy [such that the real rate of interest is constant in and off the steady state] is also stabilizing

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hevra.haifa.ac.il/econ/wp_files/wp201001.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Haifa, Department of Economics in its series Working Papers with number WP2010/1.

as in new window
Length: 30
Date of creation:
Date of revision: 01 May 2010
Handle: RePEc:haf:huedwp:wp201001

Contact details of provider:
Postal: Mount Carmel, Haifa, 31905, Israel
Phone: 972-4-8240086
Fax: 972-4-8240059
Web page: http://hevra.haifa.ac.il/econ/en/
More information through EDIRC

Related research

Keywords: Fiscal Policy; Capital-Income Tax; Monetary Policy; Macroeconomic Stabilization; Finance Constraint; Arbitrage Channel; Investment-Based Channel; Consumption-Based Channel;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Basu, Susanto & Fernald, John G, 1997. "Returns to Scale in U.S. Production: Estimates and Implications," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 249-83, April.
  2. Benhabib Jess & Farmer Roger E. A., 1994. "Indeterminacy and Increasing Returns," Journal of Economic Theory, Elsevier, vol. 63(1), pages 19-41, June.
  3. Jang-Ting Guo & Sharon G. Harrison, 2008. "Useful Government Spending and Macroeconomic (In)stability under Balanced-Budget Rules," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(3), pages 383-397, 06.
  4. Jess Benhabib & Qinglai Meng & Kazuo Nishimura, 2000. "Indeterminacy under Constant Returns to Scale in Multisector Economies," Econometrica, Econometric Society, vol. 68(6), pages 1541-1548, November.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:haf:huedwp:wp201001. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Rubinchik).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.