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The Tax-smoothing Hypothesis: Evidence from Sweden, 1952-1999

  • Johan Adler
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    This paper tests Barro's (1979) tax-smoothing hypothesis using Swedish central government data for the period 1952-1999. According to the tax-smoothing hypothesis, the government sets the budget surplus equal to expected changes in government expenditure. When expenditure is expected to increase, the government runs a budget surplus, and when expenditure is expected to fall, the government runs a budget deficit. The empirical evidence suggests that the model provides a useful benchmark and that tax-smoothing behavior can explain about 60 percent of the variability in the Swedish central government budget surplus. Copyright The editors of the "Scandinavian Journal of Economics", 2006 .

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    Article provided by Wiley Blackwell in its journal The Scandinavian Journal of Economics.

    Volume (Year): 108 (2006)
    Issue (Month): 1 (03)
    Pages: 81-95

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    Handle: RePEc:bla:scandj:v:108:y:2006:i:1:p:81-95
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    1. Olekalns, N., 1996. "Australian Evidence on Tax Smoothing and the Optimal Budget Surplus," Department of Economics - Working Papers Series 538, The University of Melbourne.
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    12. International Monetary Fund, 1999. "Spend Now, Pay Later? Tax Smoothing and Fiscal Sustainability in South Asia," IMF Working Papers 99/63, International Monetary Fund.
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