Ljungqvist, L.; Uhlig, H.F.H.V.S. - Tilburg University, Center for Economic Research - 1996
This paper examines the role for tax policies in productivity-shock driven economies with \catching-up-with-the-Joneses" utility functions.The optimal tax policy is shown to a ect the economy countercyclically via procyclical taxes, i.e., \cooling down" the economy with higher taxes when it is...