 Optimal fiscal policy in a model with search-and-matching frictions: the case of Bulgaria (1999–2018)Post-Communist Economies, 2021, vol. 33, issue 4, 500-515 Abstract: This paper explores the effects of fiscal policy in an economy with search and matching frictions. To this end, a dynamic general-equilibrium model with government sector is calibrated to Bulgarian data (1999–2018). Two regimes are compared and contrasted – the exogenous (observed) vs. optimal policy (Ramsey) case. The focus of the paper is on the relative importance of consumption vs. income taxation, as well as on the provision of utility-enhancing public services. The main findings from the computational experiments performed in the paper are: (i) The optimal steady-state income tax rate is zero; (ii) The benevolent Ramsey planner provides the optimal amount of the utility-enhancing public services, which are now three times lower; (iii) The optimal steady-state consumption tax needed to finance the optimal level of government spending is $$18.3\% $$18.3%, slightly lower than the rate in the exogenous policy case. Date: 2021 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:pocoec:v:33:y:2021:i:4:p:500-515 Ordering information: This journal article can be ordered from DOI: 10.1080/14631377.2020.1786987 Access Statistics for this article Post-Communist Economies is currently edited by Roger Clarke More articles in Post-Communist Economies from Taylor & Francis Journals |
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