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Author Ghilardi, Matteo F., author

Title Aggregate stability and balanced-budget rules / Matteo F. Ghilardi and Raffaele Rossi
Published Washington : International Monetary Fund, 2014
Washington, D. C. International Monetary Fund, 2014
Online access available from:
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Description 1 online resource (25 pages)
Series IMF working paper ; no. 14/23
Contents Cover; Table of Contents; I. Introduction; II. The Model; A. Steady State; III. Determinacy Analysis; A. Intuitions: a Closer Look at the Labour Market and the Laffer Curve; B. A Numerical Example; Figures; Figure 1. Determinacy Analysis with Labour Tax Only; IV. Policy Analysis; A. Adding Capital Taxes; Figure 2. Determinacy Analysis with Labour and Capital Taxes; B. An Empirical Perspective on the Elasticity of Substitution; C. Balanced-Budget Rules and Determinacy Analysis in the US, EU and UK; Tables; Table 1. 2007 Estimated Tax Rates
Table 2. Threshold values of σ necessary for determinacy in 2007Figure 3. Endogenous Capital and Labour income Rate for the Empirical Range of σ; IV. Conclusions; Table 3. Threshold values of σ for stability in the period 1995-2007; References; Appendix; A. The Normalization Procedure; B. The Log-Linearized System; C. Determinacy Analysis
Summary It has been shown that under perfect competition and a Cobb-Douglas production function, a basic real business cycle model may exhibit indeterminacy and sunspot fluctuations when income tax rates are determined by a balanced-budget rule. This paper introduces in an otherwise standard real business cycle model a more general and data coherent class of production functions, namely a constant elasticity of substitution production function. We show that the degree of substitutability between production factors is a key ingredient to understand the (de)stabilising properties of a balanced-budget ru
Notes "February 2014"
Bibliography Includes bibliographical references
Form Electronic book
Author Rossi, Raffaele, author
International Monetary Fund, issuing body
ISBN 9781475515824