This paper derives criteria for evaluating the impact of an increase in government expenditure on both the time path of instantaneous utility and overall welfare, under alternative forms of tax financing. These consist of three factors. The first is the direct crowding-out effect, which reflects...

Optimal tax and monetary policies in a stochastic monetary growth model are investigated. The authors' findings are of three general types. First, both capital income taxes and monetary growth are shown to influence the economy through effective risk-adjusted measures, expressed as a linear...

This paper determines conditions under which a reduction in the role of government, either through a tax cut alone, or together with accompanying expenditure cuts, will improve long-run government fiscal balance. For a ceteris paribus cut in the income tax rate to improve long-run government...

This paper analyzes the effects of monetary and fiscal policy shocks on the term structure of interest rates. Temporary versus permanent, unanticipated versus anticipated policy disturbances and the responses of long versus short, and real versus nominal rates are contrasted. The main results...