rule of thumb

Optimal fiscal policy in a DSGE model with heterogeneous agents

JEL codes: 
E62
Version Date: 
Sep 2012
Author/s: 
Abstract: 

This paper solves optimal scal policy in a simple real business cycle model with
agent heterogeneity. Introducing rule-of-thumb behaviour in some agents, I show
that the steady state optimal tax on capital in the long run should always be
zero regardless of the governments favouritism towards particular agents. Over

Report file: 
PDF icon Download the paper (1.07 MB)