Volume 18, Issue 3 (2018)                   QJER 2018, 18(3): 27-56 | Back to browse issues page

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Marzban H, Dehghanshabani Z, Rostamzadeh P, izadi H. Optimal Fiscal and Monetary Policy by Applying the Ramsey Problem. QJER 2018; 18 (3) :27-56
URL: http://ecor.modares.ac.ir/article-18-16030-en.html
Optimal Fiscal and Monetary Policy by Applying the Ramsey Problem
Hussein Marzban1 , Zahra Dehghanshabani1 , Parviz Rostamzadeh1 , Hamid Izadi * 2
1- Department of Economics, Shiraz University
2- Monetary Economics of Shiraz University, Faculty Member of Department of Economics, Faculty of Management and Humanities, Chabahar Maritime University , izadi@cmu.ac.ir
Abstract:   (9542 Views)
The aim of this study is to investigate optimal monetary and fiscal policies for the Iranian economy considering Ramsey problem.  Using a Dynamic Stochastic General Equilibrium model, the effects of imposing various taxes such as consumption tax, capital income tax, labor income tax and profit tax are examined by different scenarios. The results indicate that Friedman’s rule, or zero inflation is determined as optimal monetary policy under scenarios with and without price rigidities. In addition, since the governments try to minimize the distortions from taxes levied on different economic sectors, necessity of a subsidy or negative tax is confirmed under Ramsey conditions. According to the findings, the inflation rate not only depends on nominal and real rigidities assumed in the model, but also to the number of instruments available to the Ramsey planner.
Keywords: Ramsey Problem, Optimal Policy, Friedman’s Rule, DSGE, Simulation
Full-Text [PDF 1190 kb]   (3254 Downloads)    
Article Type: Research Paper | Subject: Economics
Received: 2016/10/27 | Revised: 2018/08/6 | Accepted: 2018/08/6 | Published: 2018/08/6
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