Is Tax-Discounting Stable over Time?

Giuseppe Nicoletti

Oxford Bulletin of Economics and Statistics, 1992, vol. 54, issue 2, 121-44

Abstract: Empirical studies of tax discounting usually assume that the relationship between private consumption and government debt reflects permanent and stable characteristics of consumer preferences. Using data for aggregate consumption over the 1953-87 period in Belgium, the author shows that this relationship differs in the long-run and in the short-run, and is not necessarily stable over time. The large tax-discounting effects estimated in this country are mostly related to the short-run determinants of consumption and tend to appear only when government debt policies become explosive. This suggests that changes in debt policies may effect, in important ways, the relationship between government deficits and private saving. Copyright 1992 by Blackwell Publishing Ltd

Date: 1992
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