Evaluating tax reforms in a monetary economy

Hypothetical revenue-neutral tax reforms are conducted in a calibrated endogenous growth model in which money serves to economize on the time-costs of transacting. The model includes the cash-in-advance (CIA) and non-monetary frameworks as special cases of the parameterization. The results from our shopping-time model suggest that both the CIA and non-monetary models may somewhat underestimate the welfare benefits of lowering the income tar, while the growth effects of the tax reforms are almost the same across the models. We also examine the transitional dynamics resulting from the taw reforms.