Aggregate Stability and Balanced-Budget Rules /

Aggregate Stability and Balanced-Budget Rules /

It has been shown that under perfect competition and a Cobb-Douglas production function, a basic real business cycle model may exhibit indeterminacy and sunspot fluctuations when income tax rates are determined by a balanced-budget rule. This paper introduces in an otherwise standard real business c...

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Bibliografische gegevens
Hoofdauteur: Ghilardi, Matteo
Andere auteurs: Rossi, Raffaele
Formaat: Tijdschrift
Taal:English
Gepubliceerd in: Washington, D.C. : International Monetary Fund, 2014.
Reeks:IMF Working Papers; Working Paper ; No. 2014/023
Onderwerpen:
Constant Elasticity Of Substitution
Fiscal Policy
Laffer Curve
Production Function
WP
United States
Online toegang:Full text available on IMF
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245 1 0 |a Aggregate Stability and Balanced-Budget Rules /  |c Matteo Ghilardi, Raffaele Rossi. 
264 1 |a Washington, D.C. :  |b International Monetary Fund,  |c 2014. 
300 |a 1 online resource (26 pages) 
490 1 |a IMF Working Papers 
500 |a <strong>Off-Campus Access:</strong> No User ID or Password Required 
500 |a <strong>On-Campus Access:</strong> No User ID or Password Required 
506 |a Electronic access restricted to authorized BRAC University faculty, staff and students 
520 3 |a It has been shown that under perfect competition and a Cobb-Douglas production function, a basic real business cycle model may exhibit indeterminacy and sunspot fluctuations when income tax rates are determined by a balanced-budget rule. This paper introduces in an otherwise standard real business cycle model a more general and data coherent class of production functions, namely a constant elasticity of substitution production function. We show that the degree of substitutability between production factors is a key ingredient to understand the (de)stabilising properties of a balanced-budget rule. Then we calibrate the model consistently with the empirical evidence, id est we set the elasticity of substitution between labour and capital below unity. We show that compared to the Cobb-Douglas case, the likelihood of indeterminacy under a balanced-budget rule is greatly reduced in the United States, the European Union and the United Kingdom. 
538 |a Mode of access: Internet 
650 7 |a Constant Elasticity Of Substitution  |2 imf 
650 7 |a Fiscal Policy  |2 imf 
650 7 |a Laffer Curve  |2 imf 
650 7 |a Production Function  |2 imf 
650 7 |a WP  |2 imf 
651 7 |a United States  |2 imf 
700 1 |a Rossi, Raffaele. 
830 0 |a IMF Working Papers; Working Paper ;  |v No. 2014/023 
856 4 0 |z Full text available on IMF  |u http://elibrary.imf.org/view/journals/001/2014/023/001.2014.issue-023-en.xml  |z IMF e-Library 

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