The Perils of Tax Smoothing: Sustainable Fiscal Policy with Random Shocks to Permanent Output

If permanent output is uncertain, tax smoothing can be perilous: both debt levels and tax rates are difficult to stabilize and may drift upwards. One practical remedy would be to target the debt. However, our simulations confirm that such a policy would require undesirably volatile fiscal adjustment...

Full description

Bibliographic Details
Main Authors:	Tanner, Evan, Carey, Kevin
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Fiscal Policy E620 National Deficit Surplus H620 National Debt Debt Management Sovereign Debt H630
Online Access:	http://hdl.handle.net/10986/4975

id	okr-10986-4975
recordtype	oai_dc
spelling	okr-10986-49752021-04-23T14:02:20Z The Perils of Tax Smoothing: Sustainable Fiscal Policy with Random Shocks to Permanent Output Tanner, Evan Carey, Kevin Fiscal Policy E620 National Deficit Surplus H620 National Debt Debt Management Sovereign Debt H630 If permanent output is uncertain, tax smoothing can be perilous: both debt levels and tax rates are difficult to stabilize and may drift upwards. One practical remedy would be to target the debt. However, our simulations confirm that such a policy would require undesirably volatile fiscal adjustments and may inhibit countercyclical borrowing. An alternative would be to link the primary surplus not only to the debt ratio (like tax smoothing) but also to its volatility, thus preempting further adjustments while gradually reducing the debt. 2012-03-30T07:30:39Z 2012-03-30T07:30:39Z 2008 Journal Article Finance a Uver/Czech Journal of Economics and Finance 00151920 http://hdl.handle.net/10986/4975 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Fiscal Policy E620 National Deficit Surplus H620 National Debt Debt Management Sovereign Debt H630
spellingShingle	Fiscal Policy E620 National Deficit Surplus H620 National Debt Debt Management Sovereign Debt H630 Tanner, Evan Carey, Kevin The Perils of Tax Smoothing: Sustainable Fiscal Policy with Random Shocks to Permanent Output
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	If permanent output is uncertain, tax smoothing can be perilous: both debt levels and tax rates are difficult to stabilize and may drift upwards. One practical remedy would be to target the debt. However, our simulations confirm that such a policy would require undesirably volatile fiscal adjustments and may inhibit countercyclical borrowing. An alternative would be to link the primary surplus not only to the debt ratio (like tax smoothing) but also to its volatility, thus preempting further adjustments while gradually reducing the debt.
format	Journal Article
author	Tanner, Evan Carey, Kevin
author_facet	Tanner, Evan Carey, Kevin
author_sort	Tanner, Evan
title	The Perils of Tax Smoothing: Sustainable Fiscal Policy with Random Shocks to Permanent Output
title_short	The Perils of Tax Smoothing: Sustainable Fiscal Policy with Random Shocks to Permanent Output
title_full	The Perils of Tax Smoothing: Sustainable Fiscal Policy with Random Shocks to Permanent Output
title_fullStr	The Perils of Tax Smoothing: Sustainable Fiscal Policy with Random Shocks to Permanent Output
title_full_unstemmed	The Perils of Tax Smoothing: Sustainable Fiscal Policy with Random Shocks to Permanent Output
title_sort	perils of tax smoothing: sustainable fiscal policy with random shocks to permanent output
publishDate	2012
url	http://hdl.handle.net/10986/4975
_version_	1764393459851984896

The Perils of Tax Smoothing: Sustainable Fiscal Policy with Random Shocks to Permanent Output

Similar Items