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Investment Shocks, Tax Evasion and the Consumption Puzzle: A DSGE Analysis with Financial Frictions

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  • Bruno Chiarini
  • Maria Ferrara
  • Elisabetta Marzano

Abstract

This paper contributes to the GDP-consumption comovement puzzle literature investigating the role of tax evasion in explaining the consumption path after a Marginal Efficiency of Investment shock. We use an otherwise standard medium-scale New Keynesian DSGE model combining tax evasion with financial frictions à la Bernanke, Gertler, Gilchrist (1999). The main result of our paper shows that tax evasion can considerably shrink the GDP-consumption comovement puzzle area.

Suggested Citation

  • Bruno Chiarini & Maria Ferrara & Elisabetta Marzano, 2016. "Investment Shocks, Tax Evasion and the Consumption Puzzle: A DSGE Analysis with Financial Frictions," CESifo Working Paper Series 6015, CESifo.
    • Handle: RePEc:ces:ceswps:_6015
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    Cited by:

    1. Ekaterina N. Nevzorova & Anna P. Kireenko & Roman A. Sklyarov, 2017. "Bibliometric Analisis of the Literature on Tax Evasion in Russia and Foreign Countries," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 3(2), pages 115-130.
    2. Igor Kotlán & Daniel Němec & Zuzana Machová, 2019. "Právní nejistota v daňové oblasti a její dopady na nabídku práce v České republice [Legal Uncertainty in Taxation and Its Impacts on Labour Supply in the Czech Republic]," Politická ekonomie, Prague University of Economics and Business, vol. 2019(4), pages 371-384.

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    More about this item

    Keywords

    tax evasion; investment shocks; DSGE modelling; financial frictions; GDP-consumption comovement puzzle;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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