Optimal fiscal policy with heterogeneous agents

Supplement to “ Optimal fiscal policy with heterogeneous agents ”

Since the proof of Theorem 1 is rather cumbersome, it is useful to break it into several lemmas.

Optimal Fiscal Policy With Oil Revenues

Fiscal Policy with Heterogeneous Agents and Incomplete Markets

I undertake a quantitative investigation into the short run effects of changes in the timing of taxes for model economies in which heterogeneous households face a borrowing constraint. A combination of the distortionary effects of non-lump-sum taxation and the liquidity effects arising from the asset market structure are found to imply large real effects from tax changes. For example, a tempora...

optimal fiscal policy with oil revenues

Optimal Fiscal Policy when Agents Fear Government Default

We consider a model in which a benevolent government has to choose optimally distortionary taxes on labor income and uncontingent debt, in order to finance an exogenous stream of public expenditure. We compare the optimal fiscal plan in two frameworks. In the first one households are fully confident about government solvency. In the second, households believe that there is a positive default pr...