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An Econometric Estimation of Tax-discounting in Pakistan

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  • Aqdas Ali Kazmi

    (Ministry of Commerce, Islamabad.)

Abstract

The debt neutrality hypothesis which has been a source of major controversies in the theory of public finance, and macroeconomics has at the same time generated a vast literature on the implications of budgetary deficits and public debt on various subsectors/ variables of the economy, such as inflation, interest rates, current account deficit, etc. Tax discounting has been one of the fields of research associated with debt neutrality. The econometric estimation of some of the standard models of taxdiscounting has shown that consumer response to fiscal policy in Pakistan reflects neither the extreme Barro-like rational anticipation of future tax liabilities nor the Buchanan-type extreme fiscal myopia. It broadly follows a middle path between these extremes. The controversy relating to debt neutrality is quite old in economic theory. However, due to its serious and far-reaching implications for the formulation of fiscal policy and macroeconomic management, the issues of debt neutrality have assumed a foremost position in economic theoretisation and empirical testing.

Suggested Citation

  • Aqdas Ali Kazmi, 1995. "An Econometric Estimation of Tax-discounting in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 34(4), pages 1067-1077.
  • Handle: RePEc:pid:journl:v:34:y:1995:i:4:p:1067-1077
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    References listed on IDEAS

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    Cited by:

    1. Aqdas Ali Kazmi, 1998. "Fiscal Policies of Pakistan and Kazmi's Hypothesis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 37(4), pages 1143-1154.

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