Signaling Fiscal Regime Sustainability
Posted: 3 Apr 2000
Date Written: 1999
This paper proposes a signaling model that offers a new perspective on why governments deviate from optimal tax smoothing and delay debt stabilization. In our model, dependable -but not fully credible- governments have an incentive to tighten the fiscal regime when the signaling effect on credit ratings is larger (that is, when a sufficiently large stock of debt has been accumulated).
Keywords: Fiscal Policy, Taxation, Credit, International Affairs
JEL Classification: E63, H6, F22
Suggested Citation: Suggested Citation