Ziramba, Emmanuel2008-09-172008-09-172008-06Gupta, R & Ziramba, E 2008, 'Misalignment in the growth-maximizing policies under alternative assumptions of tax evasion', University of Pretoria, Department of Economics, Working paper series, no. 2008-19. [http://web.up.ac.za/default.asp?ipkCategoryID=736&sub=1&parentid=677&subid=729&ipklookid=3]http://hdl.handle.net/2263/7168Using an overlapping generations monetary endogenous growth model, we analyze the possible misalignment in the growth-maximizing policies if tax evasion is assumed to be exogenous instead of being treated as a behavioral decision of the agents. By allowing for government transfers to affect young-age income, and, hence, a role for monetary policy, besides fiscal policy, in the determination of the agents reported income, we show that the failure on part of the government to realize tax evasion as endogenous, results in higher tax rates, reserve requirements and money growth rate. This, in turn, implies that the economy would end up experiencing lower (higher) steady-state growth (inflation).enUniversity of Pretoria, Department of EconomicsMonetary overlapping generations modelGrowth-maximizing policiesTax evasionMonetary policy -- Mathematical modelsEndogenous growth (Economics) -- Mathematical modelsEconomic development -- Mathematical modelsWorking Paper