nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2006‒07‒21
two papers chosen by
Karl Petrick
Leeds Metropolitan University

  1. Pigou’s Dividend versus Ramsey’s Dividend in the Double Dividend Literature By Miguel Rodríguez; Eduardo L. Giménez
  2. The Impact of Uncertainty on Monetary Policy Rules in the UK By Christopher Martin; Costas Milas

  1. By: Miguel Rodríguez (Universidade de Vigo); Eduardo L. Giménez (Universidade de Vigo)
    Abstract: This paper deals with the welfare analysis of green tax reforms. The aims of this paper are to highlight misinterpretations of policy assessments in the double dividend literature, to specify which of the efficiency costs and benefits should be ascribed to each dividend, and then, to propose a definition for the first dividend and the second dividend. We found the Pigou’s dividend more appropriate for policy guidance, in contrast to the Ramsey’s dividend usually found in mainstream literature. Therefore, we take up some authors’ recent claims about the need of unambiguous and operative definitions of these dividends both for empirical purposes, and political advice. Finally, the paper analyzes a green tax reform for the US economy to illustrate the advantages of our definitions for policy assessment. The new definitions proposed in this paper i) overcome some shortcoming of the mainstream current definitions in the literature regarding overestimation of the efficiency costs; and, ii) provide information by themselves and not as a partial view of the whole picture.
    Keywords: Double Dividend, Green Tax Reforms, Ramsey’s Dividend, Pigou’s Dividend
    JEL: H23 Q58
    Date: 2006–06
  2. By: Christopher Martin (Brunel University); Costas Milas (Keele University, Centre for Economic Research and School of Economic and Management Studies)
    Abstract: Although policymakers and commentators have repeatedly stressed the impact of uncertainty about the true state of the economy on the setting of interest rates, the academic literature has largely ignored this issue. This paper provides a theoretical analysis of how uncertainty about the true state of the economy affects optimal monetary policy rules and presents empirical evidence using data for the UK since the introduction of inflation targets in October 1992. We find that the impact of inflation on interest rates is smaller when inflation is more uncertain and larger when the output gap is more uncertain; we also find that the impact of the output gap is smaller when the output gap is more uncertain. We also find that uncertainty has reduced the volatility but has not affected the average value of interest rates.
    Keywords: Monetary policy, Uncertainty.
    JEL: C51 C52 E52 E58
    Date: 2006–06

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