The Effects of Fiscal Instruments on the Economy of Lithuania
The goal of this paper is to examine the dynamic effects of fiscal instruments in Lithuania on the economy and welfare. In the analysis, a calibrated dynamic stochastic general equilibrium model for Lithuania is employed. The calculation implies that 9-16 percent of tax cuts are self-financing in the long run. It suggests that the slope of Laffer curve in Lithuanian economy is rather flat. The analysis of effects of different tax cuts shows that the impact of 1 percentage point permanent decrease in statutory tax rate on gross domestic product is very small (within the range of –0.15 through 0.15 percent in all cases). The estimated government expenditure multiplier has a different sign in the long run when various financing sources are used to balance the government budget.
|Date of creation:||20 Apr 2009|
|Contact details of provider:|| Postal: Bank of Lithuania Gedimino pr. 6, LT-01103 Vilnius, Lithuania|
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- Mathias Trabandt & Harald Uhlig, 2006.
"How Far Are We From The Slippery Slope? The Laffer Curve Revisited,"
SFB 649 Discussion Papers
SFB649DP2006-023, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
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- Trabandt, Mathias & Uhlig, Harald, 2011. "The Laffer curve revisited," Journal of Monetary Economics, Elsevier, vol. 58(4), pages 305-327.
- Mathias Trabandt & Harald Uhlig, 2006. "How Far Are We From The Slippery Slope? The Laffer Curve Revisited," SFB 649 Discussion Papers SFB649DP2006-023, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
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