Description |
1 online resource (30 pages) |
Series |
IMF working paper ; WP/08/227 |
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IMF working paper ; WP/08/227.
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Contents |
I. Introduction; II. The Model; A. Households; B. The Government; C. Firms; D. The Initial Steady State; III. Parameterization; IV. The Domestic and International Effects of a Cut in the Income Tax Rate; A. The Impact on the Domestic Economy; B. The International Effects; V. Consumption Tax Cuts; VI. A Revenue Neutral Tax Reform; VII. Sensitivity Analysis; VII. Conclusions; Appendix; References |
Summary |
This paper focuses on the macroeconomic and budgetary impact of tax reforms in a New Keynesian two-country model. Our results show that both income and consumption unilateral tax rate reductions do not constitute a "free lunch", in the sense that they have negative budgetary consequences for the country which implements them. In addition, the degree of self-financing implied by our model is in the 8 1/2 to 24 percent range. Since the degree of self-financing estimated in previous literature was larger, we conclude that in our model not only the "lunch" is not "free", but is also not that "cheap". A comparison of alternative (income-tax versus consumption-tax based) fiscal stimulus packages shows that consumption tax cuts imply a larger short-run impact on domestic output but the income tax cuts stimulate the domestic economy more in the long run. We also look at the implications of a revenue-neutral tax reform in which consumption taxes are increased to compensate for lower income tax collection |
Notes |
At head of title: IMF Institute |
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"September 2008." |
Bibliography |
Includes bibliographical references (pages 28-30) |
Notes |
Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212 MiAaHDL |
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Print version record |
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digitized 2011 HathiTrust Digital Library committed to preserve pda MiAaHDL |
Subject |
Taxation -- Econometric models.
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Public welfare -- Econometric models
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Public welfare -- Econometric models
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Taxation -- Econometric models
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Steuerreform.
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Offene Volkswirtschaft.
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Zwei-Länder-Modell.
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Ungleichgewichtstheorie.
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Laffer-Kurve.
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Theorie.
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Form |
Electronic book
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Author |
Tervala, Juha, author.
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IMF Institute.
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