Do tax distortions lead to more indeterminacy? A New Keynesian perspective

Giovanni Di Bartolomeo () and Marco Manzo

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Abstract: Following the recent developments of the literature on stabilization policies, this paper investigates the effect of tax distortions on equilibrium determinacy in a New Keynesian economy with rule-of-thumb consumers and capital accumulation. In particular, we focus on the inter-action between monetary policy and tax distortions in supporting the saddle-path equilibrium under the assumptions of balanced budget and monetary policy satisfying a Taylor rule.

Keywords: rule-of-thumb consumers; equilibrium determinacy; fiscal and monetary policy inter-actions; and tax distortions (search for similar items in EconPapers)
Date: 2007-05
New Economics Papers: this item is included in nep-cba, nep-mac and nep-pbe
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Citations: View citations in EconPapers (3)

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Working Paper: Do tax distortions lead to more indeterminacy? A New Keynesian perspective (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ter:wpaper:0013

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