Investment Shocks, Tax Evasion and the Consumption Puzzle: A DSGE Analysis with Financial Frictions

Bruno Chiarini, Maria Ferrara and Elisabetta Marzano

No 6015, CESifo Working Paper Series from CESifo

Abstract: This paper contributes to the GDP-consumption comovement puzzle literature investigating the role of tax evasion in explaining the consumption path after a Marginal Efficiency of Investment shock. We use an otherwise standard medium-scale New Keynesian DSGE model combining tax evasion with financial frictions à la Bernanke, Gertler, Gilchrist (1999). The main result of our paper shows that tax evasion can considerably shrink the GDP-consumption comovement puzzle area.

Keywords: tax evasion; investment shocks; DSGE modelling; financial frictions; GDP-consumption comovement puzzle (search for similar items in EconPapers)
JEL-codes: E22 E32 E44 E51 E62 G10 G21 G30 H20 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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