Optimal Fiscal Policy with Recursive Preferences

• 成果类型: Article
• 署名作者: Karantounias, Anastasios G.
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Atlanta
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdy005
• 发表日期: 2018
• 页码: 2283-2317
• 关键词: long-run risk; optimal taxation; temporal resolution; business cycles; asset prices; debt; uncertainty; MARKETS; MODEL; consumption

摘要

I study the implications of recursive utility, a popular preference specification in macro-finance, for the design of optimal fiscal policy. Standard Ramsey tax-smoothing prescriptions are substantially altered. The planner over-insures by taxing less in bad times and more in good times, mitigating the effects of shocks. At the intertemporal margin, there is a novel incentive for introducing distortions that can lead to an ex-ante capital subsidy. Overall, optimal policy calls for a much stronger use of debt returns as a fiscal absorber, leading to the conclusion that actual fiscal policy is even worse than we thought.