Browsing by Author "Teles, Pedro"
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- Monetary policy and the financing of firmsPublication . Fiore, Fiorella de; Teles, Pedro; Tristani, OresteHow should monetary policy respond to changes in financial conditions? We consider a simple model where firms are subject to shocks which may force them to default on their debt. Firms' assets and liabilities are nominal and predetermined. Monetary policy can therefore affect the real value of funds used to finance production. In this model, allowing for inflation volatility in response to aggregate shocks can be optimal; the optimal response to adverse financial shocks is to lower interest rates and to engineer some inflation; and the Taylor rule may implement allocations that have opposite cyclical properties to the optimal ones.
- Optimal cooperative taxation in the global economyPublication . Chari, V. V.; Nicolini, Juan Pablo; Teles, PedroHow should countries cooperate in setting fiscal and trade policies when government expenditures must be financed with distorting taxes? We show that even if countries cannot make explicit transfers to each other, every point on the Pareto frontier is production efficient, so that international trade and capital flows should be effectively free. Trade agreements must be supplemented with fiscal policy agreements. Residence-based income tax systems have advantages over source-based systems. Taxing all household asset income at a country-specific uniform rate and setting the corporate income tax to zero yield efficient outcomes. Value-added taxes should be adjusted at the border.
- Should robots be taxed?Publication . Guerreiro, João; Rebelo, Sérgio; Teles, PedroUsing a quantitative model that features technical progress in automation and endogenous skill choice, we show that, given the current U.S. tax system, a sustained fall in automation costs can lead to a massive rise in income inequality. We characterize the optimal tax system in this model. We find that it is optimal to tax robots while the current generations of routine workers, who can no longer move to non-routine occupations, are active in the labour force. Once these workers retire, optimal robot taxes are zero.
- The monetary financing of a large fiscal shockPublication . Teles, Pedro; Tristani, OresteMotivated by the surge in debt levels through the pandemic crisis, we revisit the issue of the optimal financing of public debt. In contrast to existing results, we find that the optimal response of inflation to a large increase in debt levels is a gradual, significant and long-lasting rise in inflation. Our conclusion is due to a different assumption on the source of nominal rigidities. While the literature has focused on sticky prices, of either the Calvo (1983) or Rotemberg (1982) type, we consider sticky plans as in the sticky information set up of Mankiw and Reis (2002) . A crucial feature of our results is that a significant inflation response is desirable only if the maturity of public debt is (realistically) long.
- Unconventional fiscal policy at the zero boundPublication . Correia, Isabel; Farhi, Emmanuel; Nicolini, Juan Pablo; Teles, PedroWhen the zero lower bound on nominal interest rates binds, monetary policy cannot provide appropriate stimulus. We show that, in the standard New Keynesian model, tax policy can deliver such stimulus at no cost and in a time-consistent manner. There is no need to use inefficient policies such as wasteful public spending or future commitments to low interest rates.