Aggregate Stability in Monetary Economy with Consumption Tax and Taylor Rule

Fujisaki, Seiya (2016): Aggregate Stability in Monetary Economy with Consumption Tax and Taylor Rule.

Abstract

We analyze aggregate stability of a monetary economy with an interest-rate control type of monetary policy and endogenous consumption tax rate under balanced-budget rule, in terms of equilibrium determinacy. We find the effect of the response to income in monetary policy on macroeconomic stability depends on whether the consumption tax rate is adequately high.

• Item Type: MPRA Paper
• Language: English
• Keywords: aggregate stability, endogenous consumption tax rate, Taylor rule.
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy

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