Working Paper

Optimal fiscal policy when public capital is productive: a business- cycle perspective

Abstract: An examination of the business cycle implications of productive public capital in a two-sector, dynamic general-equilibrium model with optimal fiscal policy. In simulations, public investment and public consumption move procyclically, and the capital tax is more variable than the labor tax--features also observed in annual U.S. data.

Keywords: Capital; Fiscal policy;

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Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers (Old Series)

Publication Date: 1994

Number: 9406