This paper asks whether tax cycles can represent the optimal policy in a model without any extrinsic uncertainty. I show, in an economy without capital and where labor is the only choicevariable (a Lucas-Stokey economy), that a large class of preferences exists, where cycles are optimal, as well...

We study the optimal path for capital and labor taxes in a dynamic economy with heterogeneous agents. In an otherwise standard model we concentrate on tax reforms that are both Pareto effcient and Pareto improving. Also, we assume the capital tax rate can never rise above its initial level and...

The paper examines a class of random dynamical systems related to the classical von Neumann and Gale models of economic dynamics. Such systems are defined in terms of multivalued operators in spaces of random vectors, possessing certain properties of convexity and homogeneity. We establish a...

This paper studies the term structure implications of a simple structural economy in which the representative agent displays ambiguity aversion, modeled by Multiple Priors Recursive Utility. Bond excess returns reflect a premium for ambiguity, which is observationally distinct from the risk...

Control problems with Recursive Multiple-Priors Utility (RMPU) are highly non-linear so that RMPU asset prices have been studied in very simple exchange economies only. We identify a continuous-time exchange equilibrium with Locally-Constrained-Entropy RMPU (LCE-RMPU) that is tractable even in...