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Strict Fiscal Rules and Macroeconomic Stability: The Case of Social VAT

Patrick Fève, Julien Matheron and Jean-Guillaume Sahuc

Working papers from Banque de France

Abstract: This paper studies the local dynamic properties of a simple general equilibrium model with Social VAT. Strict balanced budget rules often lead to real indeterminacy of aggregate equilibrium, leaving room for «sunspots» fluctuations. In a closed-economy setup, social VAT escapes this property and only reduces the aggregate labor supply elasticity. However, the quantitative effects are weak.

Keywords: Macroeconomic stability; Social VAT; Labor supply elasticity; Aggregate fluctuations. (search for similar items in EconPapers)
JEL-codes: E32 E62 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2013
New Economics Papers: this item is included in nep-dge, nep-mac, nep-pbe and nep-spo
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:439

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