Three essays on optimal fiscal policy
(2023)
Files
Three_essays_optimal_fiscal_policy.pdf
Open Access - Adobe PDF
- 1.31 MB
Details
- Authors
- Supervisors
- Oikonomou, Rigas
- Abstract
- This thesis encloses three different chapters in the field of macroeconomics. Each chapter analyses optimal fiscal policy in scenarios that become relevant for debt sustainability. In the first chapter, I investigate the efficiency of the competitive equilibrium allocation in a model in which heterogeneous households buy government debt for self-insurance purposes and the government can default on it to redistribute resources across households. I show that the competitive equilibrium allocation is in general constrained inefficient due to wealth heterogeneity. As a result, default risk is higher in the market economy than in the efficient equilibrium. The second chapter builds a DSGE model with sticky prices and a fiscal block to analyse fiscal policy when the interest rate reacts weakly to inflation (passive). Contrary to the scenario where fiscal policy follows ad hoc rules, the differences in the allocation under active/passive monetary policies are small with optimal fiscal policy. Finally, in the third chapter, I study optimal fiscal and monetary policy when households value government bonds and they enter as an argument in the utility function. Under the optimal plan, tax distortions are front-loaded and the planner resorts in higher and volatile inflation to tax nominal wealth at period zero. This policy differs from the Barro's tax smoothing result and the ``zero-inflation volatility'' observed in standard models with non-state contingent debt and sticky prices.
- Affiliations
Citations
Santos Antreassian, G. (2023). Three essays on optimal fiscal policy. https://hdl.handle.net/2078.5/103470