Part 1 Empirical evidence on money and output: introduction some basic correlations estimating the effect of money on output summary. Part 2 Money in a general equilibrium framework: introduction the Tobin effect money in the utility function summary appendix - the MIU approximation problems. Part 3 Money and transactions: introduction shopping-time models cash-in-advance models other approaches summary appendix - the CIA approximation problems. Part 4 Money and public finance: introduction bugdet accounting equilibrium seigniorage optimal taxation and seigniorage Friedman's rule revisited nonindexed tax systems problems. Part 5 Money and output in the short run: introduction flexible prices sticky prices and wages a framework for monetary analysis inflation persistence summary appendix problems. Part 6 Money and the open economy: introduction the Obstfeld-Rogoff two-country model policy coordination the small open economy summary appendix problems. Part 7 The credit channel of monetary policy: introduction imperfect information in credit markets macroeconomic implications does credit matter? summary. Part 8 Discretionary policy and time inconsistency: introduction inflation under discretionary policy solutions to the inflation bias is the inflation bias important? do central banking institutions matter? lessons and conclusions problems. Part 9 Monetary-policy operating procedures: introduction from instruments to goals the instrument-choice problem operating procedures and policy measures problems. Part 10 Interest rates and monetary policy: introduction interest-rate rule and the price level interest rate policies in general equilibrium models the term structure of interest rates a model for policy analysis summary problems.

Monetary Theory and Policy

This paper investigates the impact of tax changes on economic activity. We use the narrative record, such as presidential speeches and Congressional reports, to identify the size, timing, and principal motivation for all major post war tax policy actions. This analysis allows us to separate legislated changes into those taken for reasons related to prospective economic conditions and those taken for more exogenous reasons. The behavior of output following these more exogenous changes indicates that tax increases are highly contractionary. The effects are strongly significant, highly robust, and much larger than those obtained using broader measures of tax changes. (JEL E32, E62, H20, N12) Tax changes have been a major public policy issue in recent years. The tax cuts of 2001 and 2003 were passed amid firestorms of debate about their likely effects. Some policymakers claimed that the cuts would both stimulate the economy in the short run and increase normal output in the long run. Others argued that they would raise interest rates and lower confidence and thereby reduce output in both the short run and the long run. That views of the effects of tax changes vary so radically largely reflects the fact that measuring these effects is very difficult. Tax changes occur for many reasons. Some legislated tax changes are passed for philosophical reasons or to reduce an inherited budget deficit. Others are passed because the economy is weak and predicted to fall further, or because a war is in progress and government spending is rising. And many tax changes are not legislated at all, but occur automatically because the tax base varies with the overall level of income, or because of changes in stock prices, inflation, and other nonpolicy forces. Because the factors that give rise to tax changes are often correlated with other developments in the economy, disentangling the effects of the tax changes from the effects of these underlying factors is inherently difficult. There is pervasive omitted variable bias in any regression of output on an aggregate measure of tax changes. This paper suggests one way of dealing with this omitted variable bias. There exists a vast narrative record describing the history and motivation of tax policy changes. We first use this narrative history to separate legislated tax changes from those arising from nonpolicy develop ments. We then use the information on motivation to separate the legislated tax changes into those that are likely to be contaminated by other developments affecting output, and those that can legitimately be used to measure the macroeconomic effects of tax changes. Finally, we use the legitimate observations to derive estimates of the effects of tax changes on output that are likely to be less biased than previous estimates. Section I of the paper elaborates on the conceptual framework for this study. It emphasizes that what we seek to identify from the narrative record are tax changes that are not systematically

/pdf/the-macroeconomic-effects-of-tax-changes-estimates-based-on-2own874tku.pdf

The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks

This paper proposes a modified version of Swamy's test of slope homogeneity for panel data models where the cross section dimension (N) could be large relative to the time series dimension (T). The proposed test exploits the cross section dispersion of individual slopes weighted by their relative precision. In the case of models with strictly exogenous regressors and normally distributed errors, the test is shown to have a standard normal distribution. Using Monte Carlo experiments, it is shown that the test has the correct size and satisfactory power in panels with strictly exogenous regressors for various combinations of N and T. For autoregressive (AR) models the proposed test performs well for moderate values of the root of the autoregressive process. But for AR models with roots near unity a bias-corrected bootstrapped version of the test is proposed which performs well even if N is large relative to T. The proposed cross section dispersion tests are applied to testing the homogeneity of slopes in autoregressive models of individual earnings using the PSID data. The results show statistically significant evidence of slope heterogeneity in the earnings dynamics, even when individuals with similar educational backgrounds are considered as sub-sets.

Testing Slope Homogeneity in Large Panels

https://dspace.mit.edu/bitstream/handle/1721.1/99175/Hanlon_A%20review%20of%20tax%20research.pdf;sequence=1

A review of tax research

We lay out a small open economy version of the Calvo sticky price model, and show how the equilibrium dynamics can be reduced to a simple representation in domestic inflation and the output gap. We use the resulting framework to analyse the macroeconomic implications of three alternative rulebased policy regimes for the small open economy: domestic inflation and CPI-based Taylor rules, and an exchange rate peg. We show that a key difference among these regimes lies in the relative amount of exchange rate volatility that they entail. We also discuss a special case for which domestic inflation targeting constitutes the optimal policy, and where a simple second order approximation to the utility of the representative consumer can be derived and used to evaluate the welfare losses associated with the suboptimal rules.

/pdf/monetary-policy-and-exchange-rate-volatility-in-a-small-open-3ywsgemy2r.pdf

Monetary policy and exchange rate volatility in a small open economy

This paper presents evidence of profit shifting in response to differences in corporate tax rates for a large selection of OECD countries. In our estimates we control for the effects of tax rate changes on real activity. Our baseline estimates suggest that, on average, a unilateral increase in the corporate tax rate does not lead to an increase in corporate tax revenues owing to a more than offsetting decline in reported profits.

Why Pay More? Corporate Tax Avoidance Through Transfer Pricing in OECD Countries

We use a stylised model to analyse the Stability and Growth Pact for countries that have formed the European Monetary Union (EMU). In our model, shortsighted governments fail to internalise the consequences of their debt policies for the common inflation rate fully. Therefore, while governments have no incentive to sign a stability pact in the absence of a monetary union, they do so with monetary union to restrain this externality. With uncertainty, a monetary union combined with an appropriately designed pact will be strictly preferred to autonomy. With differences in initial conditions, conflicts of interest arise. We study the Nash bargaining solution.

https://www.jstor.org/stable/pdfplus/2565634

An analysis of the Stability and Growth Pact.

http://www.rrojasdatabank.info/wir2006/pricetransfer.pdf

Why pay more? Corporate tax avoidance through transfer pricing in OECD countries

So far, the 'New Open Economy Macroeconomics' literature has primarily focused on monetary policy and monetary policy rules, rather than paying attention also to fiscal policy. This is an omission because, especially with the advent of EMU, the burden on fiscal policy as an instrument for macroeconomic stabilization has potentially increased. In this Paper, we focus on the interactions between monetary and fiscal policy in a micro-founded model of monetary union. By extending a two-country, New-Keynesian model with public spending, we find that the forward-looking Phillips curves depend on consumption, terms of trade and public spending deviations from their respective stochastic natural rates. We study the optimal coordinated monetary and fiscal policies for various settings. Generally, we find that the gains from policy commitment and from the use of fiscal policy as an instrument for stabilization are economically non-trivial. We also consider simple monetary and fiscal policy rules and investigate to what extent these rules can approximate the optimal solution under commitment.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID358060_code030427630.pdf?abstractid=358060&mirid=5

Monetary and Fiscal Policy Interactions in a Micro-Funded Model of a Monetary Union

https://cris.maastrichtuniversity.nl/ws/files/874147/guid-9b25542d-86e8-4261-89f7-092bf79282a9-ASSET1.0.pdf

Roel Beetsma

Papers

Why Pay More? Corporate Tax Avoidance Through Transfer Pricing in OECD Countries

An analysis of the Stability and Growth Pact.

Why pay more? Corporate tax avoidance through transfer pricing in OECD countries

Monetary and Fiscal Policy Interactions in a Micro-Funded Model of a Monetary Union

Monetary union without fiscal coordination may discipline policymakers