On Corporate Tax Asymmetries and Neutrality

This article discusses the effects of corporate tax asymmetries under investment irreversibility. We introduce a tax scheme where the tax base is given by the firm's return net of a rate of relief. When the firm's return is less than the imputation rate, however, no tax refunds are allowed. Unlike symmetric tax systems, the scheme proposed is neutral with respect not only to income uncertainty but also to policy uncertainty.     

Logarithmic quasi-homothetic preferences

We study a class of quasi-homothetic preferences, which result in demands that are logarithmic in own prices when these have a negligible impact on aggregate prices (as in monopolistic competition models). Thus marginal revenues are computationally friendly and well behaved.     

The role of human capital in identifying the drivers of product and process innovation: empirical investigation from Italy

Quality & Quantity - Economists recognize that the local availability of higher human capital represents significant knowledge spillovers, especially for innovation process. This research...     

Nonlinearity in monetary policy: A reconsideration of the opportunistic approach to disinflation

The proponents of the ‘opportunistic’ approach to disinflation suggest that, when inflation is close to the target, the central bank should not counteract inflationary pressures. Orphanides and Wilcox (2002) formalize this idea through a simple policy rule that prescribes a nonlinear adjustment to a history-dependent target for inflation. This embodies a regime change in monetary policy, which reacts to inflation only when this is far from the inflation target. Here we study the opportunistic approach in a New-Keynesian model with sizeable nominal and real rigidites in the form of a positive money demand and adjustment costs for investment. We find that the welfare gains delivered by the opportunistic rule arise from the time-varying inflation target, when welfare is measured by a quadratic approximation of household utility. The nonlinear zone of inaction on inflation improves welfare outcomes only when a central bank loss function with the absolute value of the output gap is used, as proposed by Orphanides and Wilcox (2002).     

Model Uncertainty, Optimal Monetary Policy and the Preferences of the Fed

Monetary policy in the US is characterized by a substantial degree of inertia. While in principle this may well be the outcome of an optimizing central bank behaviour, the ability of any derived policy rule to match the data relies on so large weights for interest rate smoothing into policy makers' preferences as to be theoretically flawed. In this paper we investigate whether such a puzzle can be interpreted as resulting from the concern of monetary authorities for potential misspecifications of the macroeconomic dynamics. Accordingly, we propose a novel thick modelling approach that incorporates model uncertainty into the identification of central bank's preferences. The thick robust policy rule shows the kind of smoothness observed in the data without resorting to implausible values for the preference parameters.