Tax Smoothing in a Financially Repressed Economy : Evidence from India

Author/Editor:

Nilss Olekalns ; Paul Cashin ; Ratna Sahay

Publication Date:

August 1, 1998

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

India has a long history of running fiscal deficits. Two broad considerations motivate a government to run a deficit: tax smoothing and tax tilting. This paper tests a version of Barro’s tax-smoothing model, using Indian data for the period 1951-52 to 1996-97. The empirical results indicate that the central government of India has tax-smoothed, while the regional governments of India have not. The paper also finds evidence of tax tilting, reflected in financial repression, which has led to the accumulation of excessive public liabilities.

Series:

Working Paper No. 98/122

Subject:

English

Publication Date:

August 1, 1998

ISBN/ISSN:

9781451854466/1018-5941

Stock No:

WPIEA1221998

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

43

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