 Spend Now, Pay Later? Tax Smoothing & Fiscal Sustainability in South AsiaPaul Cashin (pcashin@imf.org), N. Haque and Nilss Olekalns (nilss@unimelb.edu.au) No 700, Department of Economics - Working Papers Series from The University of Melbourne Abstract: This paper tests a version of Barro's tax-smoothing model, which assumes intertemporal optimization by a government seeking to minimize the distortionary costs of taxation, using Pakistan and Sri Lankan data for the periods 1956-95 and 1964-97, respectively. The empirical results indicate that Pakistan's fiscal behavior is consistent with tax smoothing, but Sri Lanka's is not. Moreover, fiscal behavior in both countries was dominated by a stagnation of revenues, large tax-tilting-induced deficits, and the consequent accumulation of excessive public liabilities. Analysis of the time-series characteristics of tax-tilting behaviour indicates that for both countries the stock of public liabilities is unsustainable under unchanged fiscal policies. Keywords: TAXATION; ECONOMIC DEVELOPMENT; FISCAL POLICY (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:mlb:wpaper:700 Access Statistics for this paper More papers in Department of Economics - Working Papers Series from The University of Melbourne Department of Economics, The University of Melbourne, 4th Floor, FBE Building, Level 4, 111 Barry Street. Victoria, 3010, Australia. Contact information at EDIRC. |
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