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.
- E32: Business Fluctuations • Cycles
- E62: Fiscal Policy
Revue Économique, vol. 65, n. 3, May 2014, pp. 543–556