Welfare-Maximizing Operational Monetary and Tax Policy Rules
Robert Kollmann ()
No 4782, CEPR Discussion Papers from C.E.P.R. Discussion Papers
This Paper computes welfare-maximizing monetary and tax policy feedback rules, in a calibrated dynamic general equilibrium model with sticky prices. The government makes exogenous final good purchases, levies a proportional income tax, and issues nominal one-period bonds. A quadratic approximation method is used to solve the model, and to compute household welfare. Optimized policy has a strong anti-inflation stance and implies persistent fluctuations of the tax rate and of public debt. Very simple optimized policy rules, under which the interest rate just responds to inflation and the tax rate just responds to public debt, yield a welfare level very close to that generated by richer rules.
Keywords: fiscal policy; monetary policy; welfare (search for similar items in EconPapers)
JEL-codes: E50 E60 H60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac, nep-mon and nep-pbe
References: Add references at CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at email@example.com
Journal Article: WELFARE-MAXIMIZING OPERATIONAL MONETARY AND TAX POLICY RULES (2008)
Working Paper: Welfare maximizing operational monetary and tax policy rules (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:4782
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=4782
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().