Intertemporal Tax-Smoothing and the Government Budget Surplus: Canada and the United States
This paper shows that, if the government smooths taxes, then the budget surplus should equal the present discounted value of expected changes in government expenditure. This implication of the tax-smoothing hypothesis imposes more stringent restrictions on the data than the more usual method of testing whether changes in tax rates follow a random walk. The tax-smoothing model is applied to the federal government budgets of Canada and the United States and, in each case, receives considerable empirical support. Copyright 1995 by Ohio State University Press.
Volume (Year): 27 (1995)
Issue (Month): 4 (November)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Trehan, Bharat & Walsh, Carl E., 1988.
"Common trends, the government's budget constraint, and revenue smoothing,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 12(2-3), pages 425-444.
- Bharat Trehan & Carl E. Walsh, 1987. "Common trends, the government's budget constraint, and revenue smoothing," Working Papers in Applied Economic Theory 87-11, Federal Reserve Bank of San Francisco.
- Chari, V V & Christiano, Lawrence J & Kehoe, Patrick J, 1991.
"Optimal Fiscal and Monetary Policy: Some Recent Results,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 23(3), pages 519-39, August.
- V. V. Chari & Lawrence J. Christiano & Patrick J. Kehoe, 1991. "Optimal fiscal and monetary policy: some recent results," Proceedings, Federal Reserve Bank of Cleveland, pages 519-546.
- V. V. Chari & Lawrence J. Christiano & Patrick J. Kehoe, 1991. "Optimal fiscal and monetary policy: some recent results," Staff Report 147, Federal Reserve Bank of Minneapolis.
- Bohn, Henning, 1990. "Tax Smoothing with Financial Instruments," American Economic Review, American Economic Association, vol. 80(5), pages 1217-30, December.
- Huang, Chao-Hsi & Lin, Kenneth S., 1993. "Deficits, government expenditures, and tax smoothing in the United States: 1929-1988," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 317-339, June.
When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:27:y:1995:i:4:p:1033-45. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.