A Real Time Tax Smoothing Based Fiscal Policy Rule

Elizabeth Wakerly, Elena Loukoianova () and Shaun Vahey

No 215, Royal Economic Society Annual Conference 2003 from Royal Economic Society

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.

Keywords: fiscal rules; tax smoothing; fiscal habits; real-time data (search for similar items in EconPapers)
JEL-codes: C82 E62 E66 (search for similar items in EconPapers)
Date: 2003-06-04
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Citations: View citations in EconPapers (9)

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Working Paper: A Real Time Tax Smoothing Based Fiscal Policy Rule (2003)
Working Paper: A Real Time Tax Smoothing Based Fiscal Policy Rule (2002)
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