We characterise optimal tax policies when the government has access to consumption taxation and cannot credibly commit to future policies. We consider a neoclassical economy where factor income taxation is distortionary within the period, due to endogenous labour and capital utilisation and...

Closely following the seminal contribution of Jappelli and Pistaferri (2014) - based on Italian household survey data - we employ data of 22 European countries to assess the role of heterogeneity of the marginal propensity to consume (MPC) for fiscal policy in the Euro area. We document an...

Societies often rely on simple rules to restrict the size and behavior of governments. When fiscal and monetary policies are conducted by a discretionary and profligate government, I find that revenue ceilings vastly outperform debt, deficit and monetary rules, both in effectiveness at curbing...

We argue that the fiscal multiplier of government purchases is increasing in the spending shock, in contrast to what is assumed in most of the literature. The fiscal multiplier is largest for large positive government spending shocks and smallest for large contractions in government spending. We...

The aggregate capital stock in a nation can be overaccumulated for many different reasons. This paper studies which policy or policy mix is more effective in achieving the socially optimal (golden rule) level of aggregate capital stock in an infinite-horizon heterogeneous-agents...

The rapidly growing national debt in the U.S. since the 1970s has alarmed and intrigued the academic world. Consequently, the concept of dynamic (in)efficiency in an overlapping generations (OLG) world and the importance of the heterogeneous-agents and incomplete markets (HAIM) hypothesis to...

We construct a dynamic general equilibrium model where agents use nominal government bonds as collateral in secured lending arrangements. If the collateral constraint binds, agents price in a liquidity premium on bonds that lowers the real rate on bonds. In equilibrium, the price level is...

Using a structural VAR analysis, we document that an increase in government purchases raises private consumption, total factor productivity (TFP) and the real wage. This poses a puzzle for both neoclassical and New-Keynesian models. We extend a standard New-Keynesian model to allow for skill...

In this paper, we explore the proposition that the optimal capital income tax is zero using an overlapping generations model. We prove that for a large class of preferences, the optimal capital income tax along the transition path and in steady state is non-zero. For a version of the model...

We estimate the fiscal (spending) multiplier using quarterly U.S. data, 1986-2017. We define government spending shocks as actual minus expected expenditure growth, the latter obtained from the Survey of Professional Forecasters. We employ the ST-VAR model with the local projections method. A...