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Redistributive Tax Policy at the Zero Bound

Manuel Lancastre

MPRA Paper from University Library of Munich, Germany

Abstract: Emulating consumer price inflation with an increasing path of consumption taxes when the nominal interest rate binds and monetary policy becomes ineffective, as proposed by Correia et al. [1] in the Standard New Keynesian model, may not neutralize a liquidity trap of very long duration. Instead this paper presents a wealth redistributive tax policy, in an OLG model with credit constraints, able to prevent or counteract a liquidity trap caused by a credit shock. The tax prescription is opposite to the one proposed by Correia et al.[1]

Keywords: Zero Bound; Fiscal policy; Credit constraints; Sticky prices; Heterogeneous agents; Redistribution (search for similar items in EconPapers)
JEL-codes: E21 E24 E31 E40 E43 E52 E62 (search for similar items in EconPapers)
Date: 2017-08-31
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Redistributive Tax Policy at the Zero Bound (2017) Downloads
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