Luo, Yulei; Nie, Jun; Young, Eric R. - In: Journal of Economic Dynamics and Control 45 (2014) C, pp. 289-314
In this paper we examine how model uncertainty due to the preference for robustness (RB) affects optimal taxation and the evolution of debt in the Barro tax-smoothing model (1979). We first study how the government spending shocks are absorbed in the short run by varying taxes or through debt...