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Monetary Policy and Automatic Stabilizers: The Role of Progressive Taxation

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Monetary Policy and Automatic Stabilizers: The Role of Progressive Taxation. / Mattesini, F.; Rossi, L.
In: Journal of Money, Credit and Banking, Vol. 44, No. 5, 31.08.2012, p. 825-862.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Mattesini, F & Rossi, L 2012, 'Monetary Policy and Automatic Stabilizers: The Role of Progressive Taxation', Journal of Money, Credit and Banking, vol. 44, no. 5, pp. 825-862. https://doi.org/10.1111/j.1538-4616.2012.00512.x

APA

Mattesini, F., & Rossi, L. (2012). Monetary Policy and Automatic Stabilizers: The Role of Progressive Taxation. Journal of Money, Credit and Banking, 44(5), 825-862. https://doi.org/10.1111/j.1538-4616.2012.00512.x

Vancouver

Mattesini F, Rossi L. Monetary Policy and Automatic Stabilizers: The Role of Progressive Taxation. Journal of Money, Credit and Banking. 2012 Aug 31;44(5):825-862. Epub 2012 Jul 26. doi: 10.1111/j.1538-4616.2012.00512.x

Author

Mattesini, F. ; Rossi, L. / Monetary Policy and Automatic Stabilizers : The Role of Progressive Taxation. In: Journal of Money, Credit and Banking. 2012 ; Vol. 44, No. 5. pp. 825-862.

Bibtex

@article{0babd46b221c423c97588e9a906f9799,
title = "Monetary Policy and Automatic Stabilizers: The Role of Progressive Taxation",
abstract = "We study the effects of progressive labor income taxation in an otherwise standard New Keynesian (NK) model. We show that progressive taxation (i) introduces a trade-off between output and inflation stabilization and affects the slope of the Phillips Curve, (ii) acts as automatic stabilizer changing the responses to technology shocks and demand shocks, and (iii) alters the prescription for the optimal monetary policy. The welfare gains from commitment decrease as labor income taxes become more progressive. Quantitatively, the model reproduces the observed negative correlation between the volatility of output, hours, and inflation and the degree of progressivity of labor income taxation. ",
keywords = "Progressive taxation, automatic stabilizers, macroeconomic volatility, optimal monetary policy",
author = "F. Mattesini and L. Rossi",
year = "2012",
month = aug,
day = "31",
doi = "10.1111/j.1538-4616.2012.00512.x",
language = "English",
volume = "44",
pages = "825--862",
journal = "Journal of Money, Credit and Banking",
issn = "0022-2879",
publisher = "Wiley-Blackwell",
number = "5",

}

RIS

TY - JOUR

T1 - Monetary Policy and Automatic Stabilizers

T2 - The Role of Progressive Taxation

AU - Mattesini, F.

AU - Rossi, L.

PY - 2012/8/31

Y1 - 2012/8/31

N2 - We study the effects of progressive labor income taxation in an otherwise standard New Keynesian (NK) model. We show that progressive taxation (i) introduces a trade-off between output and inflation stabilization and affects the slope of the Phillips Curve, (ii) acts as automatic stabilizer changing the responses to technology shocks and demand shocks, and (iii) alters the prescription for the optimal monetary policy. The welfare gains from commitment decrease as labor income taxes become more progressive. Quantitatively, the model reproduces the observed negative correlation between the volatility of output, hours, and inflation and the degree of progressivity of labor income taxation.

AB - We study the effects of progressive labor income taxation in an otherwise standard New Keynesian (NK) model. We show that progressive taxation (i) introduces a trade-off between output and inflation stabilization and affects the slope of the Phillips Curve, (ii) acts as automatic stabilizer changing the responses to technology shocks and demand shocks, and (iii) alters the prescription for the optimal monetary policy. The welfare gains from commitment decrease as labor income taxes become more progressive. Quantitatively, the model reproduces the observed negative correlation between the volatility of output, hours, and inflation and the degree of progressivity of labor income taxation.

KW - Progressive taxation

KW - automatic stabilizers

KW - macroeconomic volatility

KW - optimal monetary policy

U2 - 10.1111/j.1538-4616.2012.00512.x

DO - 10.1111/j.1538-4616.2012.00512.x

M3 - Journal article

VL - 44

SP - 825

EP - 862

JO - Journal of Money, Credit and Banking

JF - Journal of Money, Credit and Banking

SN - 0022-2879

IS - 5

ER -