Comment on “Fiscal Externalities and Optimal Taxation in an Economic Community” by Marianne Baxter and Robert G. King

Benigno, Pierpaolo (2007) Comment on “Fiscal Externalities and Optimal Taxation in an Economic Community” by Marianne Baxter and Robert G. King. In: NBER International Seminar on Macroeconomics 2005. MIT Press, Cambridge (MA) ; London, p. 251-257. ISBN 978-0-262-06265-7.

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Optimal taxation problems in open-economy models are not trivial extensions of similar analyses in closed-economy models. In this discussion, I emphasize two important caveats of open-economy optimal policy problem. First, the intertemporal budget constraint of the government is not a necessary restriction that a Ramsey government should consider in its maximization problem. This point revisit in the current framework a previous argument discussed in Woodford (1996). Second, the specification of the strategies followed by each government is critical for the outcome of the non-cooperative allocation. Finally, I argue that in the analysis of Baxter and King (2005), (BK in what follow), it would be interesting to know more about how the labor wedge is set across the different allocations and models analyzed.


[1] Baxter, Marianne and Robert G. King (2005), “Fiscal Externalities and Optimal Taxation in an Economic Community,” NBER International Seminar on Macroeconomics, forthcoming. [2] Woodford, Michael (1997), “Control of the Public Debt: A Requirement for Price Stability?” in G. Calvo and M. King, eds., The Debt Burden and Monetary Policy, London: Macmillan, 1997.

Item Type:Monograph Section
Research documents and activity classification:Book Sections > Monograph's chapters
Divisions:Department of Business and Management
Additional Information:Versione del documento: ottobre 2005.
Uncontrolled Keywords:Fiscalità. Politica fiscale. Normativa tributaria. Macroeconomia. Finanza Internazionale.
MIUR Scientific Area:Area 13 - Economics and Statistics > SECS-P/01 Political Economy
Deposited By:Silvia Capobianchi
Deposited On:28 May 2009 13:53
Last Modified:28 May 2013 20:02

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