Fiscal Instruments, Welfare and Inflation: A HANK Approach

Daniel Mugeiro da Silva ()
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Daniel Mugeiro da Silva: Nova School of Business and Economics Universidade Nova de Lisboa

Notas Económicas, 2024, issue 58, 66-94

Abstract: This study aims at answering two research questions. Firstly, given a change in the VAT rate and a change in targeted transfers, which would impact inflation the most? Secondly, after a negative supply shock, which measure would be more welfare-friendly? We find that VAT changes generate a greater impact on inflation than changes in transfers, both empiri-cally and within the structural model. Additionally, we find that a decrease in the VAT rate, though it generates more inequalities, is more welfare-friendly if it is measured through a utilitarian approach.

Keywords: Fiscal Instruments; HANK; Inflation; Welfare; VAT; Transfers (search for similar items in EconPapers)
JEL-codes: D31 E12 E62 H20 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:gmf:journl:y:2024:i:58:p:66:94

DOI: 10.14195/2183-203X_58_3

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