Model
Digital Document
Publisher
Florida Atlantic University
Description
This thesis explored the impact of inflation upon fiscal automatic
stabilizers during the 1973-75 recession. Our study confined itself to
the three main devices purported to stabilize the U.S. economy automatically:
(1) federal personal income tax liability, (2) corporate
profits tax liability, and (3) unemployment compensation benefits.
A recursive model, similar to that used by Dusenberry, Eckstein, and
Fromm to study fiscal automatic stabilizers in the 1957-58 recession,
was constructed. Our simulation results led us to conclude that there
was a substantial reduction in output and employment due to the impact
of inflation upon federal personal income tax liability in the 1973-75
recession. We reached a tentative conclusion that the effects of
inflation upon output and employment via corporate profits tax liability
were negligible. Finally, we concluded that the effects of inflation
upon output and employment via unemployment compensation benefits paid
were negligible in the recent stagflation.
stabilizers during the 1973-75 recession. Our study confined itself to
the three main devices purported to stabilize the U.S. economy automatically:
(1) federal personal income tax liability, (2) corporate
profits tax liability, and (3) unemployment compensation benefits.
A recursive model, similar to that used by Dusenberry, Eckstein, and
Fromm to study fiscal automatic stabilizers in the 1957-58 recession,
was constructed. Our simulation results led us to conclude that there
was a substantial reduction in output and employment due to the impact
of inflation upon federal personal income tax liability in the 1973-75
recession. We reached a tentative conclusion that the effects of
inflation upon output and employment via corporate profits tax liability
were negligible. Finally, we concluded that the effects of inflation
upon output and employment via unemployment compensation benefits paid
were negligible in the recent stagflation.
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