As part of the Brown Bag Lunch series, the International Economics Department at the Graduate Institute is pleased to invite you to a public talk given by Allan Gregory Auclair, PhD Researcher in International Economics, who will present his paper and work.

Corporate Taxation and Monetary Policy at the ZLB

by Allan Gregory Auclair

Abstract: This paper explores how corporate taxes and household transfers interact with a zero lower bound (ZLB) on nominal interest rates. Taxes on firms are distortionary and reduce capital demand. At the same time, tax transfers to overlapping generation households increase saving and the capital supply. In either case, equilibrium interest rates drop and the ZLB is more likely to bind. Tax policies that have a small impact on capital above the ZLB can cause large shifts in capital supply below it.  As a consequence, permanent deflation may occur. This undesirable outcome can be avoided by issuing debt on financial markets and/or modifying household saving behavior. Support for private debt may avoid the drawbacks government debt. Other redistribution policies may have some advantages as well.