Time consistent fiscal policies in a Ramsey economy

Cellini, Roberto ; Lambertini, Luca (2004) Time consistent fiscal policies in a Ramsey economy. Bologna: Dipartimento di Scienze economiche DSE, p. 26. DOI 10.6092/unibo/amsacta/4768. In: Quaderni - Working Paper DSE (522). ISSN 2282-6483.
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Abstract

This paper revisits a well-known case of optimal fiscal policy in a Ramsey model where consumer utility is defined over consumption and public goods. We show that normalising the size of the population to one eliminates the scope for active policy-making since the decentralised equilibrium coincides with social planning. Then, we modify the model to allow for a population of N > 1 agents, whereby restoring the role of the government as a policymaker. Both in the Stackelberg case and in the decentralised game, we prove that optimal fiscal policy and consumption are not only time consistent but also subgame perfect.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Cellini, Roberto
Lambertini, Luca
Keywords
differential games, optimal control, fiscal policy
Subjects
ISSN
2282-6483
DOI
Deposit date
03 Mar 2016 13:38
Last modified
03 Mar 2016 13:38
URI

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