This paper systematically examines the interrelations between a progressive income tax schedule and macroeconomic (in)stability in an otherwise standard one-sector real business model with productive government spending. We analytically show that the economy exhibits indeterminacy and sunspots...

The development of a real business cycle model in which government fiscal variables such as tax rates and public expenditures are endogenous. The authors characterize the "optimal" behavior of these policy variables over the business cycle and relate this behavior to movements in private-sector...

Since the third quarter of 2000, the U.S. economy began to experience a slowdown in its rate of growth. This slowdown serves as a reminder that the business cycle is still alive and raises the following questions: What do we know about the driving forces behind the business cycle? What should...

This paper develops a one-sector real business cycle model in which competitive firms allocate resources for the production of goods, investment in new capital, and maintenance of existing capital. Firms also choose the utilization rate of existing capital. A higher utilization rate leads to...

We examine the theoretical interrelations between progressive income taxation and macroeconomic (in)stability in an otherwise standard one-sector real business cycle model with utility-generating government purchases of goods and services. When private and public consumption expenditures are...

We examine the quantitative implications of government fiscal policy in a discrete-time one-sector growth model with a productive externality that generates social increasing returns to scale. Starting from a laissez-faire economy that exhibits an indeterminate steady state (a sink), we show...

A demonstration of how an income tax schedule that exhibits a progressivity feature can ensure saddle-path stability in a one-sector, real business-cycle model with sufficient increasing returns in production, thereby shielding the economy against sunspot fluctuations.