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Fiscal Instruments, Welfare and Inflation: A HANK Approach

Author

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  • Daniel Mugeiro da Silva

    (Nova School of Business and Economics Universidade Nova de Lisboa)

Abstract

This study aims at answering two research questions. Firstly, given a change in the VAT rate and a change in targeted transfers, which would impact inflation the most? Secondly, after a negative supply shock, which measure would be more welfare-friendly? We find that VAT changes generate a greater impact on inflation than changes in transfers, both empiri-cally and within the structural model. Additionally, we find that a decrease in the VAT rate, though it generates more inequalities, is more welfare-friendly if it is measured through a utilitarian approach.

Suggested Citation

  • Daniel Mugeiro da Silva, 2024. "Fiscal Instruments, Welfare and Inflation: A HANK Approach," Notas Económicas, Faculty of Economics, University of Coimbra, issue 58, pages 66-94, December.
    • Handle: RePEc:gmf:journl:y:2024:i:58:p:66:94
    DOI: 10.14195/2183-203X_58_3
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    More about this item

    Keywords

    Fiscal Instruments; HANK; Inflation; Welfare; VAT; Transfers;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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