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This paper analyzes, in a public finance context, how the optimal use of the inflation and the consumption tax is affected by incorporating into the model constraints on policy decisions that are likely to develop in the context of the EMS by 1992. Two main questions are addressed: first, how...
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This paper examines aggregate savings in a general equilibrium model where infinitely lived households face volatile … (and possibly uncertain) income paths, hold a risk-free asset, and face a liquidity constraint. I first show that the … when income is constant. This additional capital accumulation has sometimes been interpreted as precautionary savings, but …
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