Equilibria Under Monetary and Fiscal Policy Interactions in a Portfolio Choice Model

Baruch Gliksberg

No WP2015/1, Working Papers from University of Haifa, Department of Economics

Abstract: This paper analyzes the aftermath of monetary and fiscal policy interactions from the perspective of portfolio choice. In particular, it studies how the presence of income- taxes change the properties of general equilibrium models. It finds that relative to the previous literature [following Leeper (1991)] a new regime exists where a passive fiscal rule combined with a passive monetary rule can still deliver determinacy where the same area of the parameter space would lead to multiple solutions if taxes were lump sum. It characterizes analytically the extent to which tax cuts are self-financing and how the distortionary tax Laffer curve looks near the steady state in order to obtain the size of the new regime. In the new regime, the inflation target can temporarily increase in order to increase seigniorage revenues. With this flexibility, the monetary policy is consistent with the real debt remaining bounded, and the arithmetic that follows is monetarist and unpleasant in the sense of Sargent and Wallace (1981).

Keywords: Distorting Taxes; Dynamic Laffer Curve; Fiscal Policy; Liquidity-in- advance; Monetary Policy; Portfolio Choice; Unpleasant Monetarist Arithmetic. (search for similar items in EconPapers)
JEL-codes: C62 E60 G11 H60 (search for similar items in EconPapers)
Pages: 45
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hevra.haifa.ac.il/econ/wp_files/wp201501.pdf (application/pdf)

Related works:
Journal Article: Equilibria under monetary and fiscal policy interactions in a portfolio choice model (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:haf:huedwp:wp201501

Access Statistics for this paper

More papers in Working Papers from University of Haifa, Department of Economics 199 Aba Khoushy Ave., Mount Carmel, Haifa, Israel, 3498838. Contact information at EDIRC.
Bibliographic data for series maintained by Anna Rubinchik ().