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 1
Baseline sticky prices with nominal debt, optimized policy with simultaneous productivity and government purchases shocks
Authors describe as baseline model in Section 3.1; Column 1 represents the main sticky-prices specification with both shocks