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Fundamental Determinants of the Effects of Fiscal PolicyDennis P. J. BotmanInternational Monetary Fund (IMF) - Fiscal Affairs Department Manmohan KumarInternational Monetary Fund (IMF) - Research Department March 30, 2006 Abstract: We explore the underlying determinants of the macroeconomic effects of fiscal policy and tax and social security reform using the IMF’s Global Fiscal Model (GFM). We show that the planning horizon of consumers, access to financial markets, and the elasticity of labor supply, as well as the characteristics of utility and production functions, and the degree of competition are all critical for determining the impact of fiscal policy. Four topical fiscal policy issues, for a representative large and small economy, are examined: the effects of changes in government debt, higher government spending, tax reform, and privatization of retirement savings.
Number of Pages in PDF File: 48 Keywords: government debt, spillover effects, government spending, tax reform, privatizing retirement saving, non-Ricardian model JEL Classification: E62, F41, F42, H30, H55, H62 working papers seriesDate posted: February 16, 2012Suggested CitationContact Information
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