In this paper, we adopt a Ramsey optimal approach to identify the combination of income taxes, public expenditure, and inflation designed to achieve a fiscal consolidation. In contrast with empirical contributions that emphasize the benefits of expenditure-based consolidations, the optimal policy calls for increases in taxes and inflation. Strong monetary accommodation is quite beneficial relative to a situation where the Central Bank is only concerned with inflation stability and the inflation target is defined as a ceiling, as in the Eurozone.
Cardani, R., Menna, L., Tirelli, P. (2020). The optimal policy mix to achieve public debt consolidation. MACROECONOMIC DYNAMICS, 24(1), 113-129 [10.1017/S1365100518000433].
The optimal policy mix to achieve public debt consolidation
Cardani, R
;Menna, L;Tirelli, P
2020
Abstract
In this paper, we adopt a Ramsey optimal approach to identify the combination of income taxes, public expenditure, and inflation designed to achieve a fiscal consolidation. In contrast with empirical contributions that emphasize the benefits of expenditure-based consolidations, the optimal policy calls for increases in taxes and inflation. Strong monetary accommodation is quite beneficial relative to a situation where the Central Bank is only concerned with inflation stability and the inflation target is defined as a ceiling, as in the Eurozone.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.