Uhlig, Harald; Ljungqvist, Lars - In: American Economic Review 90 (2000) 3, pp. 356-366
This paper examines the role for tax policies in productivity-shock driven economies with catching-up-with-the-Joneses utility functions. The optimal tax policy is shown to affect the economy countercyclically via procyclical taxes, i.e., "cooling down" the economy with higher taxes when it is...