Fiscal policy rules in an overlapping generations model with endogenous labour supply
A fiscal policy rule in which taxation is a function of existing government debt (a "wealth-tax") is usually believed to be effective in providing stability. Using a dicrete-time version of Blanchard's overlapping generations model, extended to include money and an endogenous labour supply we show that, contrary to the intuition, a wealth tax might not be enough to ensure the existence of a unique, well defined, saddle-path equilibrium. We suggest that a government willing to run a positive and sustainable level of debt could use an alternative financing rule, imposing an additional tax component, that is a function of the difference between the real interest rate and the tax rate on wealth.
(This abstract was borrowed from another version of this item.)
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Obstfeld, Maurice & Rogoff, Kenneth S., 1995.
"Exchange Rate Dynamics Redux,"
12491026, Harvard University Department of Economics.
- Maurice Obstfeld and Kenneth Rogoff., 1995. "Exchange Rate Dynamics Redux," Center for International and Development Economics Research (CIDER) Working Papers C95-048, University of California at Berkeley.
- Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," Center for International and Development Economics Research (CIDER) Working Papers 233403, University of California-Berkeley, Department of Economics.
- Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," CEPR Discussion Papers 1131, C.E.P.R. Discussion Papers.
- Maurice Obstfeld & Kenneth Rogoff, 1994. "Exchange Rate Dynamics Redux," NBER Working Papers 4693, National Bureau of Economic Research, Inc.
- Rankin, Neil & Roffia, Barbara, 1999.
"Maximum Sustainable Government Debt in the Overlapping Generations Model,"
CEPR Discussion Papers
2076, C.E.P.R. Discussion Papers.
- Neil Rankin & Barbara Roffia, 2003. "Maximum Sustainable Government Debt in the Overlapping Generations Model," Manchester School, University of Manchester, vol. 71(3), pages 217-241, 06.
- Rankin, N. & Roffia, B., 1999. "Maximum Sustainable Government Debt in the Overlapping Generations Model," The Warwick Economics Research Paper Series (TWERPS) 521, University of Warwick, Department of Economics.
- Leith, Campbell & Wren-Lewis, Simon, 2000. "Interactions between Monetary and Fiscal Policy Rules," Economic Journal, Royal Economic Society, vol. 110(462), pages C93-108, March.
- Rankin, N. & Scalera, D., 1991.
"Death and the Keynesian Multiplier,"
The Warwick Economics Research Paper Series (TWERPS)
376, University of Warwick, Department of Economics.
- Heijdra, Ben J & Ligthart, Jenny E, 2000.
"The Dynamic Macroeconomic Effects of Tax Policy in an Overlapping Generations Model,"
Oxford Economic Papers,
Oxford University Press, vol. 52(4), pages 677-701, October.
- Ben J. Heijdra & Jenny E Ligthart, 1998. "The Dynamic Macroeconomic Effects of Tax Policy in an Overlapping Generations Model," IMF Working Papers 98/182, International Monetary Fund.
- Mitchell, Peter R. & Sault, Joanne E. & Wallis, Kenneth F., 2000. "Fiscal policy rules in macroeconomic models: principles and practice," Economic Modelling, Elsevier, vol. 17(2), pages 171-193, April.
- Christ, Carl F, 1979. "On Fiscal and Monetary Policies and the Government Budget Restraint," American Economic Review, American Economic Association, vol. 69(4), pages 526-38, September.
- Olivier J. Blanchard, 1984.
"Debt, Deficits and Finite Horizons,"
NBER Working Papers
1389, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:31:y:2007:i:3:p:1015-1036. 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: (Shamier, Wendy)
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.