Tax Smoothing in a Financially Repressed Economy
AbstractIndia has a long history of running fiscal deficits. Two broad considerations motivate a government to run a deficit: tax smoothing and tax tilting. This paper tests a version of Barro’s tax-smoothing model, using Indian data for the period 1951-52 to 1996-97. The empirical results indicate that the central government of India has tax-smoothed, while the regional governments of India have not. The paper also finds evidence of tax tilting, reflected in financial repression, which has led to the accumulation of excessive public liabilities.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 98/122.
Date of creation: 01 Aug 1998
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- Renu Kohli & Kenneth Kletzer, 2001. "Financial Repression and Exchange Rate Management in Developing Countries," IMF Working Papers, International Monetary Fund 01/103, International Monetary Fund.
- Johan Adler, 2006. "The Tax-smoothing Hypothesis: Evidence from Sweden, 1952-1999," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 108(1), pages 81-95, 03.
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- Kannan, R & Singh, Bhupal, 2007. "Debt-deficit dynamics in India and macroeconomic effects: A structural approach," MPRA Paper 16480, University Library of Munich, Germany, revised 2007.
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