Welfare-Maximizing Operational Monetary and Tax Policy Rules
ECARES, Universite Libre de Bruxelles; University of Paris XII; Centre for Economic Policy Research
New Keynesian DSGE model with Calvo staggered price setting, capital accumulation, monopolistic competition, proportional income tax, nominal one-period government bonds, and exogenous government purchases. Model features optimized monetary (Ta
intermediate goods firms: monopolistic competition with Calvo staggered price setting; final goods firms: perfect competition with CES aggregation
Table 1 Column 2
Sticky prices with nominal debt, optimized policy with only government purchases shocks