Fiscal Policy under Indeterminacy and Tax Evasion
Aarhus University Economics Paper No. 2005-09
25 Pages Posted: 18 Jun 2008
Date Written: May 30, 2005
This paper shows under indeterminacy and tax evasion, an increase in corporate, labor or income tax rates pushes the economy into an expansionary pattern. These effects are reversed when the steady state is saddle-path stable.
Keywords: Dynamic General Equilibrium Models, Fiscal Policy, Tax Evasion and Underground Activities, Indeterminacy and Sunspots
JEL Classification: E32, E13, E26, O40
Suggested Citation: Suggested Citation