Rule-of-thumb consumers and labor tax cut policy in the zero lower bound

Kaszab, Lorant 2012. Rule-of-thumb consumers and labor tax cut policy in the zero lower bound. [Working Paper]. Cardiff Economics Working Papers, Cardiff: Cardiff University.

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Abstract

This paper finds that labor tax cut can be an effective policy tool to mitigate the negative effects of a shock that made the zero lower bound on the nominal interest rate binding if the economy features rule-of-thumb households (besides Ricardian ones) and nominal rigidities in prices and wages. Our results are meant to contribute to the discussion initiated by Eggertsson (2010a) who found labor tax cut policy destabilising under zero nominal interest rate in a New Keynesian economy consisting only Ricardian consumers.

Item Type:	Monograph (Working Paper)
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory
Publisher:	Cardiff University
Date of First Compliant Deposit:	30 March 2016
Last Modified:	07 Oct 2015 14:50
URI:	https://orca.cardiff.ac.uk/id/eprint/77936

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