Reference

Patrick Fève, Julien Matheron, and Jean-Guillaume Sahuc, "Règles Budgétaires Strictes et Stabilité Macro-économique: le cas de la TVA Sociale", Revue Économique, vol. 65, n. 3, May 2014, pp. 543–556.

Abstract

This paper studies the local dynamic properties of a simple general equilibrium model with Social vat. Strict balanced budget rules often lead to real indeterminacy of aggregate equilibrium, leaving room for « sunspots » fluctuations. In a closed-economy setup, social vat escapes this property and only reduces the aggregate labor supply elasticity. However, the quantitative effects are weak.

JEL codes

  • E32: Business Fluctuations • Cycles
  • E62: Fiscal Policy