Presented By: Department of Economics Seminars
Optimal Long-Run Fiscal Policy with Heterogeneous Agents
Matthew Rognlie, Northwestern University
This project introduces a new sequence-space approach to characterizing the steady state of dynamic Ramsey taxation problems. Applying our approach to standard heterogeneous-agent models a la Aiyagari (1995) we find that such Ramsey steady states typically do not exist. Instead, our results point to the optimality of long-run immiseration in these models, driven by unreasonably strong anticipatory effects of future tax changes. Deviating from perfect foresight to dampen anticipation generates well-behaved Ramsey steady states.
This talk is presented by the Macroeconomics Seminar, sponsored by the Department of Economics with generous gifts given through the Michael Beauregard Fund for Macroeconomics and the Economics Strategic Fund.
This talk is presented by the Macroeconomics Seminar, sponsored by the Department of Economics with generous gifts given through the Michael Beauregard Fund for Macroeconomics and the Economics Strategic Fund.
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