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Fiscal Policy as a Determinant of Consumption Expenditure: The Estonian Case

Author

Listed:
  • Rasmus Kattai

    () (Bank of Estonia)

  • Kaie Kerem

    () (Department of Economics at Tallinn University of Technology)

  • Kadrin Keres

    () (Department of Economics at Tallinn University of Technology)

  • Martti Randveer

    () (Bank of Estonia)

Abstract

The aim of the paper is to analyze and explain the impacts of fiscal policy on householdsí consumption. Specifically we analyze the role of both discretionary and non-discretionary fiscal policy on consumption. The authors examine tax system in Estonia and distribution of income between households. In the paper the impact of different tax systems on consumption has been estimated. The analysis shows that the exchange of flat income tax to progressive income tax have a little effect on smoothing of households consumption, but can increase the burden on general government budget. It also reveals that the role of fiscal policy on private consumption has been limited. This study will rely on analysis of statistical data on householdsí income and expenditures as well as on time-series analysis of aggregated data of GDP, consumption and income tax.

Suggested Citation

  • Rasmus Kattai & Kaie Kerem & Kadrin Keres & Martti Randveer, 2004. "Fiscal Policy as a Determinant of Consumption Expenditure: The Estonian Case," Working Papers 111, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
  • Handle: RePEc:ttu:wpaper:111
    Note: This research was conducted with support from the Estonian Science Foundation (Research Project 5146).
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    File URL: http://deepthought.ttu.ee/majandus/tekstid/TUTWPE_04_111.pdf
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    References listed on IDEAS

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    1. Ray Barrell & Ian Hurst & Álvaro Pina, 2002. "Fiscal Targets, Automatic Stabilisers and their Effects on Output," Working Papers Department of Economics 2002/05, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    2. Isabelle Joumard, 2003. "Tax systems in European Union countries," OECD Economic Studies, OECD Publishing, vol. 2002(1), pages 91-151.
    3. Folster, Stefan & Henrekson, Magnus, 2001. "Growth effects of government expenditure and taxation in rich countries," European Economic Review, Elsevier, vol. 45(8), pages 1501-1520, August.
    4. Michael J. Artis & Marco Buti, 2000. "'Close-to-Balance or in Surplus': A Policy-Maker's Guide to the Implementation of the Stability and Growth Pact," Journal of Common Market Studies, Wiley Blackwell, vol. 38(4), pages 563-591, November.
    5. Alan J. Auerbach & Daniel R. Feenberg, 2000. "The Significance of Federal Taxes as Automatic Stabilizers," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 37-56, Summer.
    6. Thomas Dalsgaard & Alain de Serres, 1999. "Estimating Prudent Budgetary Margins for 11 EU Countries: A Simulated SVAR Model Approach," OECD Economics Department Working Papers 216, OECD Publishing.
    7. Bouthevillain, C. & Van Den Dool, G. & Langenus, G. & Mohr, M. & Momigliano, S. & Tujula, M. & De Cos, P.H. & Cour-Thimann, Philippine, 2001. "Cyclically Adjusted Budget Balances: an Alternative Approach," Papers 77, Quebec a Montreal - Recherche en gestion.
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    Cited by:

    1. Kaya, Ayşe & Şen, Hüseyin, 2015. "Taxes and Private Consumption Expenditure: A Component Based Analysis for Turkey," MPRA Paper 61857, University Library of Munich, Germany, revised 20 Jan 2015.

    More about this item

    Keywords

    tax reform; tax policy; consumption expenditure of household; automatic stabilizers.;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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