Title: Welfare effects of tax policy in open economies
Description: "This paper studies an international tax policy design problem by employing a two-country dynamic general equilibrium model with incomplete asset markets.  We investigate the possibility of welfare improving active tax policies, in particular capital and labor income tax, under the non-cooperative Nash equilibrium and the cooperative equilibrium.  Unlike the conventional wisdom regarding stabilization policies, optimal tax policies in our economy are procyclical.  Relative to the non-cooperative setting, international tax policy cooperation requires more active tax policies (about two times) and generates large extra welfare gains (by about a third)"--Federal Reserve Board web site.