Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171317
Authors: 
Rieth, Malte
Year of Publication: 
2017
Series/Report no.: 
DIW Discussion Papers 1697
Abstract: 
This paper characterizes capital taxation and public debt policy in a quantitative macroeconomic model with an impatient government and uncertainty. The government has access to linear taxes on capital and labor, and to non-state-contingent bonds. Government impatience generates positive and empirically realistic longrun levels of both capital taxes and public debt. Prior predictive analysis shows that the simulated model matches the distribution of both variables in a sample of 42 countries, alongside other statistics. The paper then presents econometric evidence that countries with higher political instability, used as an approximation of unobservable public discount rates, have both higher capital taxes and debt.
Subjects: 
fiscal policy
prior predictive analysis
political instability
macro panel
Ramsey optimal policy
JEL: 
E62
H21
H63
C23
Document Type: 
Working Paper

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