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The Tax-smoothing Hypothesis: Evidence from Sweden, 1952-1999

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  • Johan Adler
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    Abstract

    This paper tests Barro's (1979) tax-smoothing hypothesis using Swedish central government data for the period 1952-1999. According to the tax-smoothing hypothesis, the government sets the budget surplus equal to expected changes in government expenditure. When expenditure is expected to increase, the government runs a budget surplus, and when expenditure is expected to fall, the government runs a budget deficit. The empirical evidence suggests that the model provides a useful benchmark and that tax-smoothing behavior can explain about 60 percent of the variability in the Swedish central government budget surplus. Copyright The editors of the "Scandinavian Journal of Economics", 2006 .

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal The Scandinavian Journal of Economics.

    Volume (Year): 108 (2006)
    Issue (Month): 1 (03)
    Pages: 81-95

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    Handle: RePEc:bla:scandj:v:108:y:2006:i:1:p:81-95

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    Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

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    1. Trehan, Bharat & Walsh, Carl E, 1991. "Testing Intertemporal Budget Constraints: Theory and Applications to U.S. Federal Budget and Current Account Deficits," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 206-23, May.
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    7. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
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    9. Huang, Chao-Hsi & Lin, Kenneth S., 1993. "Deficits, government expenditures, and tax smoothing in the United States: 1929-1988," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 317-339, June.
    10. Olekalns, N., 1996. "Australian Evidence on Tax Smoothing and the Optimal Budget Surplus," Department of Economics - Working Papers Series 538, The University of Melbourne.
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    Cited by:
    1. Gerhard Reitschuler, 2010. "Fiscal Policy And Optimal Taxation: Evidence From A Tax Smoothing Exercise," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(2), pages 238-252, 05.
    2. Luo, Yulei & Nie, Jun & Young, Eric, 2014. "Model Uncertainty and Intertemporal Tax Smoothing," MPRA Paper 54268, University Library of Munich, Germany.
    3. Ananda Jayawickrama & Tilak Abeysinghe, 2013. "The experience of some OECD economies on tax smoothing," Applied Economics, Taylor & Francis Journals, vol. 45(16), pages 2305-2313, June.

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