Tax Smoothing in a Financially Repressed Economy: Evidence from India
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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. 1998/122
Subject:
Budget planning and preparation Expenditure Financial institutions Fiscal policy Government debt management Public financial management (PFM) Stocks
English
Publication Date:
August 1, 1998
ISBN/ISSN:
9781451854466/1018-5941
Stock No:
WPIEA1221998
Pages:
43
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