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Ramsey-optimal tax reforms and real exchange rate dynamics


Ramsey-optimal tax reforms and real exchange rate dynamics

Gomme, Paul, Auray, Stéphane and Eyquem, Aurélien (2018) Ramsey-optimal tax reforms and real exchange rate dynamics. Journal of International Economics . ISSN 00221996 (In Press)

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Official URL: http://dx.doi.org/10.1016/j.jinteco.2018.09.007


We solve the Ramsey-optimal tax plan for a small open economy with an endogenously-determined real exchange rate. The open economy constrains the government's setting of the capital income tax rate since physical capital cannot be dominated in rate of return by foreign assets. However, the endogenous real exchange rate loosens this constraint relative to a one good open economy model in which the real exchange rate is necessarily fixed. We find that, the dynamics of the two good small open economy model more closely resemble those of a closed economy model than a one good small open economy model.

Divisions:Concordia University > Faculty of Arts and Science > Economics
Item Type:Article
Authors:Gomme, Paul and Auray, Stéphane and Eyquem, Aurélien
Journal or Publication:Journal of International Economics
  • Projets Generique ANR 2015
  • Social Science and Humanities Research Council of Canada
Digital Object Identifier (DOI):10.1016/j.jinteco.2018.09.007
Keywords:Optimal fiscal policy; Tax reforms; Welfare
ID Code:984553
Deposited By: ALINE SOREL
Deposited On:04 Oct 2018 18:27
Last Modified:25 Sep 2020 00:00


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