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Persistent budget deficits have increased economists' interest in theories and evidence about fiscal policy. This paper develops the Ricardian approach and contrasts it with standard models. The discussion considers from major theoretical objections to Ricardian equivalence-finite lifetimes,...
Persistent link: https://www.econbiz.de/10012476379
Shifts between current taxation and debt issue alter the timing of taxes, which induces a variety of intertemporal substitution effects. In some circumstances the minimization of excess budget costs would entail stabilization of expected overall tax rates over time. The first section of the...
Persistent link: https://www.econbiz.de/10012478702
The recent literature on endogenous economic growth allows for effects of fiscal policy on long-term growth. If the social rate of return on investment exceeds the private return, then tax policies that encourage investment can raise the growth rate and levels of utility. An excess of the social...
Persistent link: https://www.econbiz.de/10012475671
The British data from the early 1700s through World War I provide an unmatched opportunity for studying the effects of temporary changes in government purchases. In this paper I examine the effects of these changes on interest rates, the quantity of money, the price level, and budget deficits....
Persistent link: https://www.econbiz.de/10012477066
The tax-smoothing theory suggests that deficits would respond particularly to recession, temporarily high government …
Persistent link: https://www.econbiz.de/10012477786
The fiscal theory of the price level (FTPL) has been active for 30 years, and the interest in this theory grew with the …-2022. The theory's centerpiece is the government's intertemporal budget constraint, which relates a country's inflation rate in …
Persistent link: https://www.econbiz.de/10014436969
The allowance for low-probability disasters, suggested by Rietz (1988), explains a lot of puzzles related to asset returns and consumption. These puzzles include the high equity premium, the low risk-free rate, the volatility of stock returns, and the low values of typical macro-econometric...
Persistent link: https://www.econbiz.de/10012467373
A new options-pricing formula applies to far-out-of-the money put options on the overall stock market when disaster risk is the dominant force, the size distribution of disasters follows a power law, and the economy has a representative agent with Epstein-Zin utility. In the applicable region,...
Persistent link: https://www.econbiz.de/10012456784
Extremely low discount rates play a central role in the Stern Review's evaluation of environmental protection, and this assumption has been criticized by many economists. The Review also stresses that great uncertainty is a critical element for optimal environmental policies. An appropriate...
Persistent link: https://www.econbiz.de/10012459404
In the rare-disasters setting, a key determinant of the equity premium is the size distribution of macroeconomic disasters, gauged by proportionate declines in per capita consumption or GDP. The long-term national-accounts data for up to 36 countries provide a large sample of disaster events of...
Persistent link: https://www.econbiz.de/10012463402