Tax Evasion and Financial Repression: A Reconsideration Using Endogenous Growth Models
AbstractUsing two dynamic monetary general equilibrium models characterized by endogenous growth, financial repression and endogenously determined tax evasion, we analyze whether financial repression can be explained by tax evasion. When calibrated to four Souther European economies, we show that higher degrees of tax evasion within a country, resulting from a higher level of corruption and a lower penalty rate, yields higher degrees of financial repression as a social optimum. However, a higher degree of tax evasion, due to a lower tax rate, reduces the severity of the financial restriction. In addition, we find the results to be robust across growth models with or without productive public expenditures. The only difference being that the policy parameters in the former case have higher optimal values.
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Bibliographic InfoPaper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200808.
Length: 26 pages
Date of creation: May 2008
Date of revision:
Underground Economy; Tax evasion; Macroeconomic Policy;
Other versions of this item:
- Rangan Gupta & Emmanuel Ziramba, 2009. "Tax evasion and financial repression: a reconsideration using endogenous growth models," Journal of Economic Studies, Emerald Group Publishing, vol. 36(6), pages 660-674, November.
- Rangan Gupta & Emmanuel Ziramba, 2008. "Tax evasion and financial repression: A reconsideration using endogenous growth models," Working Papers 81, Economic Research Southern Africa.
- E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-07 (All new papers)
- NEP-DGE-2008-06-07 (Dynamic General Equilibrium)
- NEP-MAC-2008-06-07 (Macroeconomics)
- NEP-PBE-2008-06-07 (Public Economics)
- NEP-REG-2008-06-07 (Regulation)
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- Rangan Gupta & Cobus Vermeulen, 2010.
"Private and Public Health Expenditures in an Endogenous Growth Model with Inflation Targeting,"
Annals of Economics and Finance,
Society for AEF, vol. 11(1), pages 139-153, May.
- Rangan Gupta & Cobus Vermeulen, 2010. "Private and Public Health Expenditures in an Endogenous Growth Model with Inflation Targeting," Working Papers 201001, University of Pretoria, Department of Economics.
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