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Economies 2013, 1(3), 26-48; doi:10.3390/economies1030026

Monetary Transfers in the U.S.: How Efficient Are Tax Rebates?

Department of Finance and Economics, Texas State University, 601 University Drive, San Marcos, TX 78666, USA
Received: 17 August 2013 / Revised: 22 September 2013 / Accepted: 19 October 2013 / Published: 1 November 2013
(This article belongs to the Special Issue Effects of Fiscal and Monetary Policy in the Great Recession)
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Abstract

Recent debate on the effectiveness of tax rebates has concentrated on the degree to which they can affect economic activity, which depends on the methodology, the state of the economy, and the underlying assumptions. A better approach to assess the effectiveness of these monetary transfers is by comparing this method to alternative policies—like the traditional monetary injections through the financial intermediaries. A limited participation model calibrated to the U.S. economy is used to show that the higher the proportion of the monetary injection channeled through the consumers—instead of banks—leads to a less vigorous recovery of output but softens the detrimental effect on the utility of the representative household from the inherent inflationary pressure. This result is robust to the relative importance of the injection (utilization of resources) and alternative utility functions. View Full-Text
Keywords: tax rebates; monetary policy; expansionary and stabilization policy tax rebates; monetary policy; expansionary and stabilization policy
This is an open access article distributed under the Creative Commons Attribution License (CC BY 3.0).

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Vacaflores, D.E. Monetary Transfers in the U.S.: How Efficient Are Tax Rebates? Economies 2013, 1, 26-48.

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