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A Real Time Tax Smoothing Based Fiscal Policy Rule

Author

Listed:
  • Wakerly, Elizabeth C

    (University of East Anglia)

  • Elena Loukoianova
  • Shaun P. Vahey

Abstract

We consider the real-time implementation of a fiscal policy rule based on tax smoothing (Barro (1979), Bohn (1998)). We show that the tax smoothing approach, augmented by fiscal habit considerations, provides a surprisingly accurate description of US budget surplus movements. In order to investigate the robustness of the policy implications of the rule, we construct a real-time US fiscal data set, complementing the data documented by Croushore and Stark (2001). For each variable, we record the different vintages, reflecting the remeasurements that occur over time. We demonstrate that the rule provides a useful benchmark for policy analysis that is robust to real-time remeasurements.

Suggested Citation

  • Wakerly, Elizabeth C & Elena Loukoianova & Shaun P. Vahey, 2003. "A Real Time Tax Smoothing Based Fiscal Policy Rule," Royal Economic Society Annual Conference 2003 215, Royal Economic Society.
    • Handle: RePEc:ecj:ac2003:215
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    Cited by:

    1. Pierre Aldama & Jérôme Creel, 2020. "Asymmetric macroeconomic stabilization and fiscal consolidation in the OECD and the Euro Area," Documents de Travail de l'OFCE 2020-09, Observatoire Francais des Conjonctures Economiques (OFCE).
    2. Jacopo Cimadomo, 2016. "Real-Time Data And Fiscal Policy Analysis: A Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 30(2), pages 302-326, April.
    3. Dean Croushore & Simon van Norden, 2014. "Fiscal policy: ex ante and ex post," Working Papers 14-22, Federal Reserve Bank of Philadelphia.
    4. repec:spo:wpmain:info:hdl:2441/5a3rl1um0d9rdbe3itnk6f8m89 is not listed on IDEAS
    5. Jacopo Cimadomo, 2012. "Fiscal Policy in Real Time," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(2), pages 440-465, June.
    6. Aldama, Pierre & Creel, Jérôme, 2022. "Real-time fiscal policy responses in the OECD from 1997 to 2018: Procyclical but sustainable?," European Journal of Political Economy, Elsevier, vol. 73(C).

    More about this item

    Keywords

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    JEL classification:

    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions

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