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Heterogeneity between unemployed and employed individuals matters for optimal fiscal policy. This paper considers the consequences of welfare heterogeneity between these two groups for the determination of optimal capital and labor income taxes in a model with matching frictions in the labor...
Persistent link: https://www.econbiz.de/10005069214
We re-examine the optimality of tax smoothing from the point of view of frictional labor markets. Our central result is that whether or not this cornerstone optimal fiscal policy prescription carries over to an environment with labor market frictions depends crucially on the cyclical nature of...
Persistent link: https://www.econbiz.de/10011080439
A growing body of evidence suggests that ongoing relationships between consumers and firms may be important for understanding price dynamics. We investigate whether the existence of such customer relationships has important consequences for the conduct of both long-run and short-run policy. Our...
Persistent link: https://www.econbiz.de/10011081022
Empirical evidence suggests that capital separation is an important phenomenon over and beyond depreciation and that reallocation is a costly and time-consuming process. In addition, both separation and reallocation rates display substantial variation over the business cycle. We build a dynamic...
Persistent link: https://www.econbiz.de/10005090772
the model's response to news shocks in general.
Persistent link: https://www.econbiz.de/10011080673
This paper documents that over the past 25 years, aggregate hourly real wages in the United States have become substantially more volatile relative to output. We use micro-data from the Current Population Survey (CPS) to show that this increase in relative volatility is predominantly due to...
Persistent link: https://www.econbiz.de/10011080835
Persistent link: https://www.econbiz.de/10011081126
News shocks about future increases in Total Factor Productivity (TFP) lead to a large and persistent drop in inflation and the Federal Funds rate while driving up the slope of the term structure of interest rates (Kurmann and Otrok, 2010). In this paper, we first show that a monetary DSGE model...
Persistent link: https://www.econbiz.de/10011081410
versions of our environment, capital-income subsidies are consistent with zero intertemporal distortions. Our main conclusion is that capital-tax policy can fundamentally be driven by monetary issues.
Persistent link: https://www.econbiz.de/10011080433
We study optimal fiscal policy when product variety is endogenous and products are long-lived assets for firms. Depending on preferences, product creation should be either subsidized or taxed in the long run, by subsidizing or taxing dividends. In the most empirically relevant case, dividends...
Persistent link: https://www.econbiz.de/10011080880