Optimal Government Bond Finance
(with R.B. Thakkar)
Journal of Macroeconomics , 10(2), Spring 1988, pp. 217-229
Abstract: Control theory is used to analyze optimal bond and tax finance, where welfare costs of taxation increase with increases in the tax rate, interest rates increase with increases in the ratio of bonds outstanding to wealth, and the government's objective is to minimize the present value of total welfare costs of taxation. The tax rate and the bond-income ratio adjust gradually to a steady state determined by the parameters of the model, unlike the historically determined optimal bond-income ratios and constant optimal planned tax rates in Barro (1979). Comparative dynamic analysis of transitory changes shows that, as in Barro (1979), bond finance is a shock-absorber that smooths tax rate changes over time.
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Automatic Stabilizers?
Journal of Macroeconomics , 8(1), Winter 1986, pp. 43-54
Abstract: The effectiveness of "automatic stabilizers" is examined in a stochastic model similar to that of McCallum and Whitaker (1979), but where the "automatic stabilizers" are permitted to affect the elasticity of aggregate supply. These measures increase or decrease the variance of output for a closed economy, depending on the nature of the shocks to which it is subject, while for a small open economy these measures increase the variance of output.
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Uncertainty and Front-End Loading of Labor Agreements
Journal of Labor Research , 6(1), February 1985, pp. 113-117
Abstract: Uncertainty of future prices is offered as an explanation for front-end loading of real wages in nominal wage contracts. Exploitation of mutually beneficial gains from trade between risk-neutral employers and employees implies an expected future real wage that is lower the greater is the uncertainty of future prices, and the observed extent of front-end loading is consistent with plausible values of uncertainty of future prices.
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