Tax Smoothing in a Financially Repressed Economy - Evidence from India
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 1966-97. 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 fiancial 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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Other versions of this item:
- Cashin, P. & Olekalns, N. & Sahay, R., 1998. "Tax Smoothing in a Financially Repessed Economy: Evidence from India," Department of Economics - Working Papers Series 656, The University of Melbourne.
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
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- NEP-ALL-2013-02-16 (All new papers)
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- Angyridis, Constantine, 2009. "Balanced budget vs. Tax smoothing in a small open economy: A welfare comparison," Journal of Macroeconomics, Elsevier, vol. 31(3), pages 438-463, September.
- Gerhard Reitschuler, 2011. "Optimal taxation and budget deficits: Evidence for the EU's New Member States," Economics Bulletin, AccessEcon, vol. 31(3), pages 2593-2602.
- 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.
- Adler, Johan, 2003. "Has Sweden’s government budget policy been too discretionary? Evidence from a generalization of the tax smoothing hypothesis," Working Papers in Economics 89, University of Gothenburg, Department of Economics.
- Renu Kohli & Kenneth Kletzer, 2001. "Financial Repression and Exchange Rate Management in Developing Countries: Theory and Empirical Evidence for India," IMF Working Papers 01/103, International Monetary Fund.
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