This article derives optimal fiscal rules within a stochastic model of Keynesian type in the context of Poole (1970) analysis. By using optimal control theory and applying the Hamilton-Jacoby-Bellman equation, we extend the original Poole results concerning the output stabilization properties of monetary policy to the case of fiscal policy. In particular, we look for the optimal setting of government expenditure and lump-sum taxation in the case that the fiscal authority wishes to keep the product close to a reference value and that the economy is assumed to be affected by stochastic disturbances of real and/or monetary type. According to the findings an optimal government expenditure rule is on average preferable to a taxation rule whatever the source of disturbances.
OPTIMAL FISCAL POLICY IN A SIMPLE MACROECONOMIC CONTEXT / Luca, Correani; Fabio Di, Dio; Patri', Stefano. - ELETTRONICO. - (2013), pp. 1-18.
OPTIMAL FISCAL POLICY IN A SIMPLE MACROECONOMIC CONTEXT
Fabio Di Dio;PATRI', Stefano
2013
Abstract
This article derives optimal fiscal rules within a stochastic model of Keynesian type in the context of Poole (1970) analysis. By using optimal control theory and applying the Hamilton-Jacoby-Bellman equation, we extend the original Poole results concerning the output stabilization properties of monetary policy to the case of fiscal policy. In particular, we look for the optimal setting of government expenditure and lump-sum taxation in the case that the fiscal authority wishes to keep the product close to a reference value and that the economy is assumed to be affected by stochastic disturbances of real and/or monetary type. According to the findings an optimal government expenditure rule is on average preferable to a taxation rule whatever the source of disturbances.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.