Advanced Search
MyIDEAS: Login to save this paper or follow this series

Economic Growth and Endogenous Fiscal Policy: In Search of a Data Consistent General Equilibrium Model

Contents:

Author Info

  • Jim Malley
  • Apostolis Philippopoulos

Abstract

This paper searches for a general equilibrium model of optimal growth and endogenous fiscal policy with the aim of explaining the interaction between private agents and fiscal authorities in the U.S., West Germany, Japan and the U.K. over the period 1960-1996. Our search is conducted in the context of popular models with closed-form analytical solutions since this is necessary to formally test the models' theoretical restrictions. In West Germany and Japan there is evidence that the fiscal authorities act as optimizing Stackelberg leaders who are concerned about the current welfare of private agents. In contrast, the fiscal authorities in the U.S. and U.K. do not appear to act as optimizing agents; instead, they follow simple rule-of-thumb policy rules. In all countries, the tax smoothing model, according to which policymakers find it optimal not to react to the state of the economy, is rejected.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2000/wp-cesifo-2000-01/WP235.PDF
Download Restriction: no

Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 235.

as in new window
Length:
Date of creation: 2000
Date of revision:
Handle: RePEc:ces:ceswps:_235

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Email:
Web page: http://www.cesifo.de
More information through EDIRC

Related research

Keywords: Optimal fiscal policy and private agents; economic growth;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Sala-I-Martin, X. & Barro, R.J., 1991. "Public Finance in Models of Economic Growth," Papers, Yale - Economic Growth Center 640, Yale - Economic Growth Center.
  2. V. V. Chari & Lawrence J. Christiano & Patrick J. Kehoe, 1993. "Optimal Fiscal Policy in a Business Cycle Model," NBER Working Papers 4490, National Bureau of Economic Research, Inc.
  3. Hsiao, Cheng, 1983. "Identification," Handbook of Econometrics, Elsevier, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 1, chapter 4, pages 223-283 Elsevier.
  4. Dunne, John Paul & Pashardes, Panos & Smith, Ronald P, 1984. "Needs, Costs and Bureaucracy: The Allocation of Public Consumption in the UK," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 94(373), pages 1-15, March.
  5. Grossman,G.M. & Helpman,E., 1996. "Intergenerational Redistribution with Short-Lived Governements," Papers, Tel Aviv 2-96, Tel Aviv.
  6. Lawrence J. Christiano & Martin Eichenbaum, 1990. "Current real business cycle theories and aggregate labor market fluctuations," Working Paper Series, Macroeconomic Issues 90, Federal Reserve Bank of Chicago.
  7. Ambler, Steve & Paquet, Alain, 1996. "Fiscal spending shocks, endogenous government spending, and real business cycles," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 20(1-3), pages 237-256.
  8. Kollintzas, Tryphon & Philippopoulos, Apostolis & Vassilatos, Vanghelis, 2000. "Is Tax Policy Coordination Necessary?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2348, C.E.P.R. Discussion Papers.
  9. Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Scholarly Articles 3196332, Harvard University Department of Economics.
  10. Persson, T. & Tabellini, G., 1998. "The Size and Scope of Government: Comparative Politics with Rational Politicians," Papers, Stockholm - International Economic Studies 658, Stockholm - International Economic Studies.
  11. Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Fiscal and Monetary Policy in an Economy Without Capital," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. King, R.G. & Baxter, M., 1990. "Fiscal Policy In General Equilibrium," RCER Working Papers 244, University of Rochester - Center for Economic Research (RCER).
  13. Harald Uhlig & Martin Lettau, 1999. "Rules of Thumb versus Dynamic Programming," American Economic Review, American Economic Association, American Economic Association, vol. 89(1), pages 148-174, March.
  14. Shantayanan Devarajan & Vinaya Swaroop & Heng-fu Zou, 1996. "The composition of public expenditure and economic growth," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 77, China Economics and Management Academy, Central University of Finance and Economics.
  15. Campbell, John, 1994. "Inspecting the Mechanism: An Analytical Approach to the Stochastic Growth Model," Scholarly Articles 3196342, Harvard University Department of Economics.
  16. McGrattan, Ellen R., 1994. "The macroeconomic effects of distortionary taxation," Journal of Monetary Economics, Elsevier, Elsevier, vol. 33(3), pages 573-601, June.
  17. Benhabib, Jess & Velasco, Andres, 1996. "On the optimal and best sustainable taxes in an open economy," European Economic Review, Elsevier, Elsevier, vol. 40(1), pages 135-154, January.
  18. Serletis, Apostolos & Schorn, Richard G, 1999. "International Evidence on the Tax- and Revenue-Smoothing Hypotheses," Oxford Economic Papers, Oxford University Press, vol. 51(2), pages 387-96, April.
  19. Richmond, J, 1974. "Identifiability in Linear Models," Econometrica, Econometric Society, Econometric Society, vol. 42(4), pages 731-36, July.
  20. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, Econometric Society, vol. 54(3), pages 607-22, May.
  21. Jim Malley & Apostolis Philippopoulos & George Economides, 1999. "Testing For Tax Smoothing In A General Equilibrium Model Of Growth," Working Papers, Business School - Economics, University of Glasgow 1999_22, Business School - Economics, University of Glasgow.
  22. Steve Ambler & Alain Paquet, 1994. "Fiscal spending shocks, endogenous government spending, and real business cycles," Discussion Paper / Institute for Empirical Macroeconomics 94, Federal Reserve Bank of Minneapolis.
  23. V.V. Chari & Patrick J. Kehoe & Edward C. Prescott, 1988. "Time consistency and policy," Staff Report, Federal Reserve Bank of Minneapolis 115, Federal Reserve Bank of Minneapolis.
  24. Kollintzas, T. & Philippopoulos, A. & Vasillatos, V., 1999. "Is Tax Policy Coordination Necessary?," DEOS Working Papers 110, Athens University of Economics and Business.
  25. Devereux, Michael B. & Wen, Jean-Francois, 1998. "Political instability, capital taxation, and growth," European Economic Review, Elsevier, Elsevier, vol. 42(9), pages 1635-1651, November.
  26. Lockwood, Ben & Philippopoulos, Apostolis & Snell, Andy, 1996. "Fiscal Policy, Public Debt Stabilisation and Politics: Theory and UK Evidence," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(437), pages 894-911, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Jim Malley & Apostolis Philippopoulos, 1999. "A note on testing for tax-smoothing in general equilibrium," Working Papers, Business School - Economics, University of Glasgow 1999_17, Business School - Economics, University of Glasgow.
  2. Jim Malley & Apostolis Philippopoulos & George Economides, 1999. "Testing For Tax Smoothing In A General Equilibrium Model Of Growth," Working Papers, Business School - Economics, University of Glasgow 1999_22, Business School - Economics, University of Glasgow.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_235. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.