Redistributive Tax Policy at the Zero Bound

Manuel Lancastre

MPRA Paper from University Library of Munich, Germany

Abstract: Generating consumer price inflation with an increasing path of consumption taxes when the nominal interest rate zero lower bond is binding and monetary policy becomes ineffective, as proposed by Correia et al. [1], may not neutralize a liquidity trap when liquidity is constrained. Instead, this paper shows that a redistributive tax policy may counteract a zero bound recession in liquidity constrained economies with no need to increase public spending and debt, with a fiscal prescription curiously 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
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Redistributive Tax Policy at the Zero Bound (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:98947

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