The Macroeconomic Effects of Individual Commodity Tax
This paper investigates the condition which raising individual consumption tax raises output and private consumption in general equilibrium model. In many of the neoclassical papers, the government expenditure decreases consumption because the government expenditure causes the negative wealth shock. On the other hand, the many empirical results are contrary. This contradiction is called "Fiscal Policy Puzzle". But, if the substitution effect of levying on additive ad-valorem commodity tax of a good is larger than the negative wealth effect of taxing and expanding government expenditure, individual tax finance can increase macroeconomic effect, in contrast to lump-sum and general commodity tax.
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- Forni, Lorenzo & Monteforte, Libero & Sessa, Luca, 2009.
"The general equilibrium effects of fiscal policy: Estimates for the Euro area,"
Journal of Public Economics,
Elsevier, vol. 93(3-4), pages 559-585, April.
- Luca Sessa & Libero Monteforte & Lorenzo Forni, 2007. "The general equilibrium effects of fiscal policy: estimates for the euro area," 2007 Meeting Papers 352, Society for Economic Dynamics.
- Lorenzo Forni & Libero Monteforte & Luca Sessa, 2007. "The general equilibrium effects of fiscal policy: estimates for the euro area," Temi di discussione (Economic working papers) 652, Bank of Italy, Economic Research and International Relations Area.
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