President Biden signed a $1.9 trillion COVID relief package (the “American Rescue Plan”) on March 11, 2021. Without a corresponding increase in taxes, this plan has set off alarm bells for those concerned about the expansion of government deficits and debt. Mainstream economists have raised...

How does economic activity outside of government control-informality-affect the conduct of fiscal and monetary policy? I study this question in a New Keynesian, small open economy model. The model is assumed to feature informality in both goods and labor markets. A non-traded sector produces a...

The escaped savings are critical for the cycle of money, as express the amount of money which leak from an economy and not return back to make more economic cycles. This paper is about the comparison of the cycle of money including the escaping savings and without the escaping saving. Then, it...

In a simple cash-credit model, I study the effects of the combination of costly tax collection and tax evasion on fiscal and monetary policy for optimal resource allocation. Allowing the informal sector to use cash more intensively than the formal sector, I compute the optimal interest and tax...

Can introducing Central Bank Digital Currency (CBDC) improve social welfare? We construct a dual currency model to study whether introducing CBDC with a record- keeping technology can reduce tax evasion incentives, and further achieve a better al- location than in a cash-only economy. In our...

Can introducing Central Bank Digital Currency (CBDC) improve social welfare? We construct a dual currency model to study whether introducing CBDC with a recordkeeping technology can reduce tax evasion incentives in cash transactions, and further achieve a better allocation than in a cash-only...

This paper investigates the effect of electronic payments technology on firms’ tax compliance in a large developing economy. We consider India’s demonetization policy which, by limiting the availability of cash, led to a large increase in the use of electronic forms of payments. Using...

This paper investigates the effect of electronic payment technology on tax compliance in a large developing economy. We consider India's demonetization policy which, by limiting cash availability, led to a large increase in the use of electronic forms of payments. Using administrative data on...