scholarly journals Optimal Fiscal Policy with Endogenous Time Preference

2015 ◽  
Vol 17 (6) ◽  
pp. 848-873 ◽  
Author(s):  
EVANGELOS V. DIOIKITOPOULOS ◽  
SARANTIS KALYVITIS
Keyword(s):  
Fiscal Policy ◽  
Time Preference ◽  
Endogenous Time Preference ◽  
Optimal Fiscal Policy

scholarly journals ENDOGENOUS TIME PREFERENCE AND PUBLIC POLICY: GROWTH AND FISCAL IMPLICATIONS

2010 ◽  
Vol 14 (S2) ◽  
pp. 243-257 ◽  
Author(s):  
Evangelos V. Dioikitopoulos ◽  
Sarantis Kalyvitis
Keyword(s):  
Public Policy ◽  
Fiscal Policy ◽  
Time Preference ◽  
Competitive Equilibrium ◽  
Capital Intensity ◽  
Public Capital ◽  
Policy Implications ◽  
Government Size ◽  
Endogenous Time Preference ◽  
The Government

This paper studies the growth and fiscal policy implications of the assumption that public policy generates an externality in the individual rate of time preference through the aggregate public capital stock. We examine the competitive equilibrium properties and we solve for endogenous growth–maximizing fiscal policy. We investigate the behavior of the government size and the growth rate to the sensitivity of time preference to public capital and the magnitude of public capital externality on production. We find that the Barro taxation rule [Barro, Robert J., Journal of Political Economy 98 (1990), 103–125], which states that the elasticity of public capital in the production function should equal the government size, is suboptimal. We show that the government does not necessarily have to increase income taxation following a rise in public capital intensity because of the externality of public capital on time preference and, in turn, on growth and the tax base of the economy.

HABIT FORMATION AND GOVERNMENT SPENDING IN A SMALL OPEN ECONOMY

2003 ◽  
Vol 7 (3) ◽  
pp. 407-423 ◽  
Author(s):  
Cem Karayalçin
Keyword(s):  
Fiscal Policy ◽  
General Equilibrium ◽  
Current Account ◽  
Open Economy ◽  
Equilibrium Model ◽  
Government Spending ◽  
Time Preference ◽  
Small Open Economy ◽  
Long Run ◽  
Fiscal Shocks

The paper studies the effects of an expansionary fiscal policy in a general equilibrium model of a small open economy. Households are assumed to possess habit-forming, endogenous rates of time preference. In response to fiscal shocks, the model generates cyclical endogenous persistence and procyclical time paths for consumption, employment, and investment, as well as a countercyclical path for the current account. Furthermore, fiscal shocks are shown to have positive long-run effects on output and negative long-run effects on consumption.

Sign in / Sign up

Export Citation Format

Share Document