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Fiscal Policy as a Determinant of Consumption Expenditure: The Estonian Case

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Author Info

  • Rasmus Kattai

    ()
    (Bank of Estonia)

  • Kaie Kerem

    ()
    (Department of Economics at Tallinn University of Technology)

  • Kadrin Keres

    ()
    (Department of Economics at Tallinn University of Technology)

  • Martti Randveer

    ()
    (Bank of Estonia)

Abstract

The aim of the paper is to analyze and explain the impacts of fiscal policy on households’ consumption. Specifically we analyze the role of both discretionary and non-discretionary fiscal policy on consumption. The authors examine tax system in Estonia and distribution of income between households. In the paper the impact of different tax systems on consumption has been estimated. The analysis shows that the exchange of flat income tax to progressive income tax have a little effect on smoothing of households consumption, but can increase the burden on general government budget. It also reveals that the role of fiscal policy on private consumption has been limited. This study will rely on analysis of statistical data on households’ income and expenditures as well as on time-series analysis of aggregated data of GDP, consumption and income tax.

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Bibliographic Info

Paper provided by Tallinn School of Economics and Business Administration, Tallinn University of Technology in its series Working Papers with number 111.

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Length: 22
Date of creation: 2004
Date of revision:
Publication status: Published in Working Papers in Economics.School of Economics and Business Administration,Tallinn University of Technology (TUTWPE), Pages 117-138
Handle: RePEc:ttu:wpaper:111

Note: This research was conducted with support from the Estonian Science Foundation (Research Project 5146).
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Related research

Keywords: tax reform; tax policy; consumption expenditure of household; automatic stabilizers.;

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References

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  1. Fölster, Stefan & Henrekson, Magnus, 1998. "Growth Effects of Government Expenditure and Taxation in Rich Countries," Working Paper Series 503, Research Institute of Industrial Economics, revised 20 Jun 2000.
  2. Michael J. Artis & Marco Buti, 2000. "'Close-to-Balance or in Surplus': A Policy-Maker's Guide to the Implementation of the Stability and Growth Pact," Journal of Common Market Studies, Wiley Blackwell, vol. 38(4), pages 563-591, November.
  3. Bouthevillain, C. & Van Den Dool, G. & Langenus, G. & Mohr, M. & Momigliano, S. & Tujula, M. & De Cos, P.H. & Cour-Thimann, Philippine, 2001. "Cyclically Adjusted Budget Balances: an Alternative Approach," Papers 77, Quebec a Montreal - Recherche en gestion.
  4. Ray Barrell & Ian Hurst & Álvaro Pina, 2002. "Fiscal Targets, Automatic Stabilisers and their Effects on Output," Working Papers Department of Economics 2002/05, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  5. Isabelle Joumard, 2002. "Tax systems in European Union countries," OECD Economic Studies, OECD Publishing, vol. 2002(1), pages 91-151.
  6. Thomas Dalsgaard & Alain de Serres, 1999. "Estimating Prudent Budgetary Margins for 11 EU Countries: A Simulated SVAR Model Approach," OECD Economics Department Working Papers 216, OECD Publishing.
  7. Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
  8. Alan J. Auerbach & Daniel R. Feenberg, 2000. "The Significance of Federal Taxes as Automatic Stabilizers," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 37-56, Summer.
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