Artikel
Time-consistent optimal fiscal policy over the business cycle
This paper examines a dynamic stochastic economy with a benevolent government that cannot commit to its future policies. I consider equilibria that are time-consistent and allow for history-dependent strategies. A new numerical algorithm is developed to solve for the set of equilibrium payoffs. For a baseline economy calibrated to the U.S. economy, the capital income tax with the highest social welfare is slightly procyclical, while the labor income tax is countercyclical. Compared with the data, this equilibrium provides a better account of the cyclical properties of U.S. tax policy than other solutions that abstract from history dependence. The welfare cost of no commitment is about 0.22% of aggregate consumption as compared to the Ramsey allocation with full commitment.
- Language
-
Englisch
- Bibliographic citation
-
Journal: Quantitative Economics ; ISSN: 1759-7331 ; Volume: 6 ; Year: 2015 ; Issue: 1 ; Pages: 189-221 ; New Haven, CT: The Econometric Society
- Classification
-
Wirtschaft
- Subject
-
Optimal fiscal policy
business cycle
recursive game theory
time consistency
- Event
-
Geistige Schöpfung
- (who)
-
Feng, Zhigang
- Event
-
Veröffentlichung
- (who)
-
The Econometric Society
- (where)
-
New Haven, CT
- (when)
-
2015
- DOI
-
doi:10.3982/QE370
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Feng, Zhigang
- The Econometric Society
Time of origin
- 2015
Other Objects (12)
Optimal fiscal policy over the business cycle
The effects of fiscal rules on public investment over the cycle
Monetary and Fiscal Policy Interactions over the Cycle: Some Empirical Evidence
The effects of fiscal rules on public investment over the cycle
Optimal time-consistent taxation with default
Optimal time-consistent government debt maturity
Optimal housing, consumption, and investment decisions over the life-cycle
Optimal housing, consumption, and investment decisions over the life-cycle
Time consistent fiscal policies in a Ramsey economy
Time-Consistent Fiscal Policy in a Debt Crisis
Appropriate fiscal policy over the business cycle: Proper stimulus policies can work
Optimal Fiscal Policy
Optimal fiscal policy over the business cycle
The effects of fiscal rules on public investment over the cycle
Monetary and Fiscal Policy Interactions over the Cycle: Some Empirical Evidence
The effects of fiscal rules on public investment over the cycle
Optimal time-consistent taxation with default
Optimal time-consistent government debt maturity
Optimal housing, consumption, and investment decisions over the life-cycle
Optimal housing, consumption, and investment decisions over the life-cycle
Time consistent fiscal policies in a Ramsey economy
Time-Consistent Fiscal Policy in a Debt Crisis
Appropriate fiscal policy over the business cycle: Proper stimulus policies can work
Optimal Fiscal Policy
Optimal fiscal policy over the business cycle
The effects of fiscal rules on public investment over the cycle
Monetary and Fiscal Policy Interactions over the Cycle: Some Empirical Evidence
The effects of fiscal rules on public investment over the cycle
Optimal time-consistent taxation with default
Optimal time-consistent government debt maturity
Optimal housing, consumption, and investment decisions over the life-cycle
Optimal housing, consumption, and investment decisions over the life-cycle
Time consistent fiscal policies in a Ramsey economy
Time-Consistent Fiscal Policy in a Debt Crisis
Appropriate fiscal policy over the business cycle: Proper stimulus policies can work