Fiscal Policy and the Nominal Term Premium

Distortionary income taxation in a standard New Keynesian model substantially increases the nominal term-premium on long-term bonds relative to a model with lumpsum taxes. Also the empirical level of the nominal term premium can be matched with lower risk-aversion coefficient in case of a model with income taxes relative to a model with long-run inflation risks.

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Year of publication:	2013-11
Authors:	Kaszab, Lorant ; Maršál, Aleš
Institutions:	Economics Section, Cardiff Business School
Subject:	zero-coupon bond \| nominal term premium \| third-order approximation \| distortionary income taxation

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Extent:	application/pdf
Series:	Cardiff Economics Working Papers. - ISSN 1749-6101.
Type of publication:	Book / Working Paper
Notes:	Number E2013/13 14 pages
Classification:	E13 - Neoclassical ; E31 - Price Level; Inflation; Deflation ; E43 - Determination of Interest Rates; Term Structure Interest Rates ; E44 - Financial Markets and the Macroeconomy ; E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010903796