One of the most important objectives of economic policy is to ensure, via the appropriate manipulation of the available policy instruments (control variables), that the economic system tracks, as closely as possible, a desired path for the policy targets (outputs). One of the approaches that has been utilized for the design of economic policy is the feedback approach, stemming from the mathematical control theory literature. Various aspects of the feedback methodology have been utilized for the purposes of policy design for more than 50 years, starting with the use of PID controllers in the seminal paper by Phillips (1954). These aspects range from (stochastic) optimal feedback control (see, The importance of feedback rules for policy design is evident from the fact that for more than 20 years monetary policy decisions have been, to a large extent, based on the Taylor rule (see Taylor 1993); this is a linear feedback policy rule stipulating (in its simplest form) that the interest rate is set based on deviations of inflation and GDP from target levels of inflation and potential GDP, respectively. It is interesting to note here that Taylor presented a rule that had fixed settings for the parameters; in particular:among(1) r = p + 0.5y + 0.5(p − 2) + 2
AbstractWe present an algorithmic approach for the design of fiscal policy rules. In particular, using algorithmic feedback control techniques, we design linear feedback policy rules such that predetermined target levels for GDP and public debt are simultaneously, exactly tracked. We run a number of simulations in order to examine the effects of different policy response rates and the overall effectiveness of the proposed methodology.
Assessing the contribution of intangible investment to growth is a challenging and complex task for any country. However, it has become increasingly difficult to determine both the exact magnitude of economic performance and its composition in the case of the Irish economy. This is mainly due to the impact of certain distortionary transactions by a select number of multinationals operating in the Irish jurisdiction. In this paper, we address this issue by assessing, in a detailed manner, the contribution of intangible and tangible assets to the Irish growth story. We control for distortions in the official investment data series while also incorporating intangible assets that are not currently included in the National Accounts. Our results show that the observed unprecedented increase in the official intangible investment has a relatively minor contribution to the actual Irish labor productivity growth. Once the distortions are filtered out, Irish labor productivity growth is driven by tangible capital. More interestingly, non‐national accounts intangible capital has a sizeable pro‐cyclical impact on labor productivity growth.
This article provides estimates of the effective tax rates in Ireland for the 1995-2017 period. We use these aggregate tax indicators to compare the developments in the Irish tax policy mix with the rest of the European Union countries and investigate any potential relation with Ireland’s macroeconomic performance. Our findings show that distortionary taxes, e.g. on factors of production, are significantly lower while less distortionary taxes, e.g. on consumption, are higher in Ireland than most European countries. Thus, the distribution of tax burden falls relatively more on consumption and to a lesser extent on labour than capital; while in the EU average the norm is the opposite. The descriptive analysis indicates that this shift in the Irish tax policy mix is correlated with the country’s strong economic performance.
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