This paper shows under indeterminacy and tax evasion, an increase in corporate, labor or income tax rates pushes the economy into an expansionary pattern. These effects are reversed when the steady state is saddle-path stable

This paper introduces underground activities and tax evasion into a one sector dynamic general equilibrium model with external effects. The model presents a novel mechanism driving the self-fulfilling prophecies, which is triggered by the reallocation of resources to the underground sector to...

This paper shows that underground activities and tax evasion may be another possible source of local indeterminacy of the equilibrium path. We derive necessary and sufficient conditions for equilibrium path to be locally indeterminate under tax evasion and underground activities. Moreover, the...