General-equilibrium effects of investment tax incentives

Rochelle M. Edge and Jeremy B. Rudd

Journal of Monetary Economics, 2011, vol. 58, issue 6, 564-577

Abstract: A new-Keynesian model with a nominal tax system is developed and used to study the macroeconomic effects of temporary tax-based investment incentives. Two claims regarding the effects of these incentives are examined: first that they are overstated in partial-equilibrium frameworks; and second that repeated use of such incentives by policymakers can ultimately be destabilizing. The results contradict the first claim and imply that the second claim is not general. The model is also used to compute the predicted effects of an investment tax incentive that has figured prominently in recent fiscal stimulus packages.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393211001061
Full text for ScienceDirect subscribers only

Related works:
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:eee:moneco:v:58:y:2011:i:6:p:564-577

DOI: 10.1016/j.jmoneco.2011.10.007

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().