This paper studies the optimal management of the maturity of government debt in an economy without commitment. We consider a reputation where any deviation triggers reversion to the worst sustainable equilibrium. We obtain two results. First, contrary to earlier literature, we show that a very...

This Paper analyses the optimal timing of taxes on capital income. We show that the celebrated result that taxes should front-loaded with an initially high tax followed by a discrete jump to the steady state is knife-edge, hinging on capital having a constant depreciation rate. An empirically...

This paper considers a reputation model of optimal taxation in which the public is unsure about the government type. A long-lived government can be trustworthy (meaning that it commits to its announced tax rate) or opportunistic (meaning that it retains the ability to change its tax rate after...

This paper investigates the relationship between economic growth in Poland and four types of taxes and human capital investment. We primarily rely on an exogenous growth model that merges the Mankiw-Romer-Weil model, augmented with learning-by-doing and spillover-effects, with selected elements...

What is the prescription of Ramsey capital taxation in the long run? Aiyagari (1995) addressed the question in a heterogeneous-agent incomplete-markets (HAIM) economy, showing that a positive capital tax should be imposed to implement the so-called modified golden rule (MGR). This paper revisits...

We compute the optimal non-linear tax policy for a dynastic economy with uninsurable risk, where generations are linked by dynastic wealth accumulation and correlated incomes. Unlike earlier studies, we take full account of the welfare distribution along the transition to the new steady state...

We develop a theoretical framework in which political and economic cycles are jointly determined. These cycles are driven by three political economy frictions: policymakers are non-benevolent, they cannot commit to policies, and they have private information about the tightness of the government...

This paper studies Pareto-optimal risk-sharing arrangements in a private information economy with aggregate uncertainty and ex ante heterogeneous agents. I show how to implement Pareto-optima as equilibria when agents can trade claims to consumption contingent on aggregate shocks in financial...

We provide an introduction to optimal fiscal and monetary policy using the primal approach to optimal taxation. We use this approach to address how fiscal and monetary policy should be set over the long run and over the business cycle. We find four substantive lessons for policymaking: Capital...

This chapter critically reviews the literature which explains why and under which circumstances governments accumulate more debt than it would be consistent with optimal fiscal policy. We also discuss numerical rules or institutional designs which might lead to a moderation of these distortions.