How quantitatively important are shocks to consumption and income tax rates for business cycle fluctuations? Lessons from Bulgaria (1999-2020)

Aleksandar Vasilev

EconStor Open Access Articles and Book Chapters, 2024, vol. 10, issue 1, 7-19

Abstract: This paper analyzes the macroeconomic effects of fluctuations in the marginal tax rates of consumption and income. To this end, stochastic tax rates are introduced as in Braun (1992), into a real-business-cycle setup augmented with a detailed government sector. The model is calibrated to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2020). The quantitative importance of the presence of stochastic taxation is investigated for the stabilization of cyclical fluctuations in Bulgaria. The quantitative effect of such shocks to the marginal tax rates is found to be very small, and thus not important for either business cycle stabilization, or public finance issues.

Keywords: business cycles; stochastic taxes (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2024
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https://www.econstor.eu/bitstream/10419/306417/1/Tax_shocks_Bulgaria_2024.pdf (application/pdf)

Related works:
Working Paper: How Quantitatively Important are Shocks to Consumption and Income Tax Rates for Business Cycle Fluctuations? Lessons from Bulgaria (1999-2020) (2023)
Working Paper: How quantitatively important are shocks to consumption and income tax rates for business cycle fluctuations? Lessons from Bulgaria (1999-2020) (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:306417

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