Did Tax Policies mitigate US Business Cycles?

R. Jimborean and Filippo Ferroni

Working papers from Banque de France

Abstract: I study whether US Tax Policies affected economic volatility during the post World War II period. I employ a Real Business Cycle model with distorting taxation on household income and tax rules, and assume that taxes respond to the cyclical conditions of the economy. I estimate the deep parameters of the model using Bayesian techniques. My findings are; (a) fiscal policies display a strong countercyclical behavior, (b) help to reduce the cyclical and raw volatility of GDP, consumption, investment when the government can issue debt, and (c) unexpected changes in tax policies do not affect the volatility of the macroeconomic variables.

Keywords: Fiscal Policy and Business Cycles; Bayesian Methods. (search for similar items in EconPapers)
JEL-codes: C11 C22 E32 E62 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2010
New Economics Papers: this item is included in nep-acc, nep-dge and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:296

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