Real Business Cycles and Automatic Stabilizers∗
نویسندگان
چکیده
We show that in a standard, technology shock-driven one-sector real business cycle model, the stabilization effects of government fiscal policy depend crucially on how labor hours enter the household’s period utility function and the associated labor-market behavior. In particular, when the household utility is logarithmic in both consumption and leisure, income taxes are destabilizing and government purchases are stabilizing. However, the results are reversed when preferences are instead convex in hours worked. That is, income taxes are now stabilizing and public spending is destabilizing. Furthermore, under both preference specifications, the magnitude of cyclical fluctuations in output remains unchanged when the income tax rate and the share of government purchases in GDP are equal (including laissez-faire).
منابع مشابه
The Role of Automatic Stabilizers in the U.s. Business Cycle
Most countries have automatic rules in their tax-and-transfer systems that are partly intended to stabilize economic fluctuations. This paper measures how effective they are. We put forward a model that merges the standard incomplete-markets model of consumption and inequality with the new Keynesian model of nominal rigidities and business cycles, and that includes most of the main potential st...
متن کاملOptimal Automatic Stabilizers∗
Should the generosity of unemployment benefits and the progressivity of income taxes depend on the presence of business cycles? This paper proposes a tractable model where there is a role for social insurance against uninsurable shocks to income and unemployment, as well as inefficient business cycles driven by aggregate shocks through matching frictions and nominal rigidities. We derive an aug...
متن کاملMeasuring the role of automatic stabilizers in the U.S. business cycle∗
Most countries have automatic rules in their tax-and-transfer systems that are intended, at least partly, to stabilize economic fluctuations. We measure how effective these automatic stabilizers are in a modern business-cycle model. We consider the effect of the stabilizers on aggregate demand, on the incentives to work and save, and on the distribution of income across households, all of which...
متن کاملBank Lending Behaviour over the Business Cycle in Iran
This paper studies bank loans over the business cycles in Iran to determine the role of Iranian banks in stabilizing credit. By estimating the long-run relations using dynamic OLS and fully modified OLS estimators, the findings show that real bank lending is positively related to real GDP in the long-run providing evidences of the pro-cyclicality of bank lending in Iran. Hence, Iranian banking ...
متن کاملThe Role of Financial Frictions in Iran’s Business Cycles: A DSGE Approach
B efore the incidence of the financial crisis in 2008, the financial sector was ignored in the most of business cycles analyses. It was assumed that the financial sector played no independent role in describing business cycle fluctuations and followed the real part of the economy. In recent years, modeling financial frictions have been much considered in business cycles literature. T...
متن کامل