This paper studies the aggregate and distributional implications of Markov-perfect tax-spending policy in a neoclassical growth model with capitalists and workers. Focusing on the long run, our main …ndings are: (i) it is optimal for a benevolent government, which cares equally about its citizens, to tax capital heavily and to subsidise labour; (ii) a Pareto improving means to reduce ine¢ cient...

We consider optimal government debt maturity in a deterministic economy which the can issue any arbitrary structure and bond prices are function of government’s current future primary surpluses. The sequentially chooses policy, taking into account how choices—which impact policy—feed back prices. show that issuing consols constitutes unique stationary portfolio, as it boosts credibility to poli...

i n the past decades, the effect of different tax amendments on various economic issues has been studied. the majority of these studies have avoided considering shadow economy as part of the calculation and analysis, and an issue, which has received little attention, is the relationship between green tax reforms and shadow economy, as for informal labor, which is well-connected to unemployment ...

We characterize Markov-perfect equilibria in a setting where the absence of government commitment affects the financing of productive public capital. We show that at any date, a government in office only considers intertemporal distortions over two consecutive periods in choosing taxes. We then use our framework to quantify the value of commitment, which we define as that obtained from binding ...

We characterize Markov-perfect equilibria in a setting where the absence of government commitment affects the financing of productive public capital. We show that at any date, a government in office only considers intertemporal distortions over two consecutive periods in choosing taxes. We then use our framework to quantify the value of commitment, which we define as that obtained from binding ...

This paper studies growth and welfare effects of fiscal policy in an endogenous growth model with productive public capital where we consider both distortionary and non-distortionary taxation in the model simultaneously. Analyzing the model it is assumed that the economy originally is on the balanced growth path when the government changes its fiscal parameters. The paper then studies growth an...

This work is concerned with singularly perturbed multi-scale switching diffusions. The switching process is a two-time-scale Markov chain with slow and fast components subject to weak and strong interactions. In the model, there are two small parameters ε and δ. The first one highlights the fast changing part of the switching process, and the other delineates the slow diffusion. We treat the ca...

Most economists intuitively consider purchasing power parity (PPP) to be true. Nevertheless, quite surprisingly, the empirical literature is not very supportive for PPP. In this paper, however, we …nd evidence in favor of PPP using a new test. The test is embedded in a Markov regime-switching model for the exchange rate, because earlier papers have shown that this model describes the data bette...

We study optimal taxation of savings in an economy where agents face self-control problems, and we allow the severity of self-control to change over the life cycle. We focus on quasi-hyperbolic discounting with constant elasticity of intertemporal substitution utility functions and linear Markov equilibria. We derive explicit formulas for optimal taxes that implement the efficient (commitment) ...