Time-varying Consumption Tax, Productive Government Spending, and Aggregate Instability
Mauro Bambi () and
Alain Venditti ()
Working Papers from HAL
In this paper we investigate if government balanced-budget rules together with endogenous taxation may lead to aggregate instability in an endogenous growth framework. After highlighting the differences with the exogenous growth framework, we prove that under counter-cyclical consumption taxes, while there exists a unique balanced growth path, sunspot equilibria based on self-fulfilling expectations occur through a form of global indeterminacy. In addition, we argue that this result is empirically plausible for a large set of OECD countries and that it may also emerge with endogenous income taxes.
Keywords: sunspot equilibria; self-fulfilling expectations; global indeterminacy; time-varying consumption tax; endogenous growth (search for similar items in EconPapers)
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Working Paper: Time-varying Consumption Tax, Productive Government Spending, and Aggregate Instability (2018)
Working Paper: Time-varying Consumption Tax, Productive Government Spending, and Aggregate Instability (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:halshs-01934819
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