Fiscal policy and tax collection lags: stability, cycles and chaos

Luciano Fanti

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: A simple dynamic IS-LM model with "balanced budget" and money financing deficit can show, in the presence of realistic tax collection lags, regular and chaotic cycles depending on the "mix" of fiscal policies. We argue that also rigid and transparent expenditure limits which an increasing number of countries have recently adopted, could be ineffective in terms of stability if the role of collection lags is neglected. Moreover also the "dimension" of the public intervention in the economy matters for stability, especially as a determinant of chaotic behaviours.

Keywords: IS-LM models; fiscal policy; collection lags; Hopf bifurcation; chaos (search for similar items in EconPapers)
JEL-codes: E30 E62 (search for similar items in EconPapers)
Date: 2003-01-01
Note: ISSN 2039-1854
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2003/15

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