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Author: Alexandra Fotiou Publisher: International Monetary Fund ISBN: 1513545868 Category : Business & Economics Languages : en Pages : 54
Book Description
Using the post-WWII data of U.S. federal corporate income tax changes, within a Smooth Transition VAR, this paper finds that the output effect of capital income tax cuts is government debt-dependent: it is less expansionary when debt is high than when it is low. To explore the mechanisms that can drive this fiscal state-dependent tax effect, the paper uses a DSGE model with regime-switching fiscal policy and finds that a capital income tax cut is stimulative to the extent that it is unlikely to result in a future fiscal adjustment. As government debt increases to a sufficiently high level, the probability of future fiscal adjustments starts rising, and the expansionary effects of a capital income tax cut can diminish substantially, whether the expected adjustments are through a policy reversal or a consumption tax increase. Also, a capital income tax cut need not always have large revenue feedback effects as suggested in the literature.
Author: Alexandra Fotiou Publisher: International Monetary Fund ISBN: 1513545868 Category : Business & Economics Languages : en Pages : 54
Book Description
Using the post-WWII data of U.S. federal corporate income tax changes, within a Smooth Transition VAR, this paper finds that the output effect of capital income tax cuts is government debt-dependent: it is less expansionary when debt is high than when it is low. To explore the mechanisms that can drive this fiscal state-dependent tax effect, the paper uses a DSGE model with regime-switching fiscal policy and finds that a capital income tax cut is stimulative to the extent that it is unlikely to result in a future fiscal adjustment. As government debt increases to a sufficiently high level, the probability of future fiscal adjustments starts rising, and the expansionary effects of a capital income tax cut can diminish substantially, whether the expected adjustments are through a policy reversal or a consumption tax increase. Also, a capital income tax cut need not always have large revenue feedback effects as suggested in the literature.
Author: Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
Congress enacted major tax cuts in 2001, 2002, and 2003. The acts reduced marginal income tax rates; reduced taxes on married couples, dividends, capital gains, and on estates and gifts; increased the child tax credit; and accelerated depreciation for business investment. The tax cuts resulted in an estimated revenue loss of 0.4% of GDP in 2001, 1.1% in 2002, and 1.6% in 2003. Most of the tax cuts are scheduled to expire after 10 years, but proponents intended that they be permanent. Since government spending rose as taxes were cut, the cuts can be characterized as deficit financed. It is hard to be certain what effects the tax cuts have had on the economy because there is no way to compare actual events to the counterfactual case where the tax cuts were not enacted. The most common method of estimating a tax cut's effect is to feed it into a macroeconomic model of the economy and see what the model predicts. Note that this is typically done before the fact: economic estimates of the tax cut's effect are not based on actual ex post data. These estimates are highly uncertain since there is no one macroeconomic model that adequately captures all of the economy's dynamics, no consensus among macroeconomists as to which one model is most suitable for policy simulations, and no model with a strong track record in accurately projecting economic events. Most estimates predict that the tax cuts will increase economic growth in the short term and reduce it in the long run. For example, the Joint Committee on Taxation predicts that the 2003 tax cut will increase GDP by an average of 0.2 to 0.5% in the first five years and decrease it by -0.1 to -0.2% over the next five years. Keynesian models find the largest positive short-term effect of the tax cuts on the economy. But these effects are completely temporary because they focus on how tax cuts boost aggregate spending; in the long run, prices adjust, and production rather than spending determines the level of output. In neo-classical (Solow) growth models, deficit-financed tax cuts reduce national saving, thereby reducing national income because capital investment can only be financed through national saving or foreign borrowing. If the latter occurs, the result will be an increased trade deficit. In intertemporal models, a deficit-financed tax cut is unsustainable: it must be offset in the future by a tax increase or spending cut to prevent the national debt from growing indefinitely. Thus, in these models tax cuts followed by tax increases lead individuals to shift work and saving into the low-tax period, increasing growth, and out of the high-tax period, reducing growth. The period encompassing the tax cuts featured a recession of average duration but below-average depth, an initially sluggish recovery, a deep and unusually long decline in employment, a small decline in hours worked, a sharp and long lasting contraction in investment spending, a significant decline in national saving, and an unusually large trade deficit. Opponents see this as evidence that the tax cuts were ineffective; proponents argue that the economy would have performed worse in their absence. One should also consider that some, perhaps most, of the recovery was due to monetary rather than fiscal stimulus. (This report will not be updated.)
Author: Dwight R. Lee Publisher: Pacific Studies in Public Poli ISBN: Category : Business & Economics Languages : en Pages : 592
Book Description
This texts contains essays written by economists who review the effects of past government actions & reforms needed to avoid long term economic stagnation. Topics discussed include social security, the military industrial complex, & private vs. political entrpreneurship. Generally, the topics include such topics as the economic effects of taxation, spending, deficits, & other forms of hidden taxation, & taxation & individual rights.
Author: Richard Hemming Publisher: International Monetary Fund ISBN: Category : Business & Economics Languages : en Pages : 62
Book Description
This paper reviews the theoretical and empirical literature on the effectiveness of fiscal policy. The focus is on the size of fiscal multipliers, and on the possibility that multipliers can turn negative (i.e., that fiscal contractions can be expansionary). The paper concludes that fiscal multipliers are overwhelmingly positive but small. However, there is some evidence of negative fiscal multipliers.
Author: Ms.Era Dabla-Norris Publisher: International Monetary Fund ISBN: 1484377451 Category : Business & Economics Languages : en Pages : 47
Book Description
This paper examines the macroeconomic effects of tax changes during fiscal consolidations. We build a new narrative dataset of tax changes during fiscal consolidation years, containing detailed information on the expected revenue impact, motivation, and announcement and implementation dates of nearly 2,500 tax measures across 10 OECD countries. We analyze the macroeconomic impact of tax changes, distinguishing between tax rate and tax base changes, and further separating between changes in personal income, corporate income, and value added tax. Our results suggest that base broadening during fiscal consolidations leads to smaller output and employment declines compared to rate hikes, even when distinguishing between tax types.
Author: Mr.Daniel Leigh Publisher: International Monetary Fund ISBN: 1455294691 Category : Business & Economics Languages : en Pages : 41
Book Description
This paper investigates the short-term effects of fiscal consolidation on economic activity in OECD economies. We examine the historical record, including Budget Speeches and IMFdocuments, to identify changes in fiscal policy motivated by a desire to reduce the budget deficit and not by responding to prospective economic conditions. Using this new dataset, our estimates suggest fiscal consolidation has contractionary effects on private domestic demand and GDP. By contrast, estimates based on conventional measures of the fiscal policy stance used in the literature support the expansionary fiscal contractions hypothesis but appear to be biased toward overstating expansionary effects.
Author: International Monetary Fund Publisher: International Monetary Fund ISBN: 1498344658 Category : Business & Economics Languages : en Pages : 257
Book Description
This paper explores how fiscal policy can affect medium- to long-term growth. It identifies the main channels through which fiscal policy can influence growth and distills practical lessons for policymakers. The particular mix of policy measures, however, will depend on country-specific conditions, capacities, and preferences. The paper draws on the Fund’s extensive technical assistance on fiscal reforms as well as several analytical studies, including a novel approach for country studies, a statistical analysis of growth accelerations following fiscal reforms, and simulations of an endogenous growth model.
Author: George A. Akerlof Publisher: MIT Press ISBN: 0262529858 Category : Business & Economics Languages : en Pages : 369
Book Description
Top economists consider how to conduct policy in a world where previous beliefs have been shattered by the recent financial and economic crises. Since 2008, economic policymakers and researchers have occupied a brave new economic world. Previous consensuses have been upended, former assumptions have been cast into doubt, and new approaches have yet to stand the test of time. Policymakers have been forced to improvise and researchers to rethink basic theory. George Akerlof, Nobel Laureate and one of this volume's editors, compares the crisis to a cat stuck in a tree, afraid to move. In April 2013, the International Monetary Fund brought together leading economists and economic policymakers to discuss the slowly emerging contours of the macroeconomic future. This book offers their combined insights. The editors and contributors—who include the Nobel Laureate and bestselling author Joseph Stiglitz, Federal Reserve Vice Chair Janet Yellen, and the former Governor of the Bank of Israel Stanley Fischer—consider the lessons learned from the crisis and its aftermath. They discuss, among other things, post-crisis questions about the traditional policy focus on inflation; macroprudential tools (which focus on the stability of the entire financial system rather than of individual firms) and their effectiveness; fiscal stimulus, public debt, and fiscal consolidation; and exchange rate arrangements.
Author: Alexandra Fotiou
Author: Alexandra Fotiou
Author: 
Author: Kevin Quinn
Author: Dwight R. Lee
Author: 
Author: Richard Hemming
Author: Ms.Era Dabla-Norris
Author: Mr.Daniel Leigh
Author: International Monetary Fund
Author: George A. Akerlof