Australian Evidence on Tax Smoothing and the Optimal Budget Surplus
AbstractThis paper tests a version of R. J. Barro's tax smoothing hypothesis using Australian data for the period 1964-65 to 1994-95. The model assumes intertemporal optimization by a government seeking to minimize the distortionary effects of tax collection. The model predicts that the budget surplus is stationary even if government expenditure and tax collections are nonstationary. In addition, the surplus should be a linear function of expected future changes to government expenditure. The results indicate that Australian fiscal policy has been too volatile to be consistent with optimal tax smoothing. Copyright 1997 by The Economic Society of Australia.
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Bibliographic InfoArticle provided by The Economic Society of Australia in its journal The Economic Record.
Volume (Year): 73 (1997)
Issue (Month): 222 (September)
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Other versions of this item:
- Olekalns, N., 1996. "Australian Evidence on Tax Smoothing and the Optimal Budget Surplus," Department of Economics - Working Papers Series 538, The University of Melbourne.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
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