Tax Smoothing in a Financially Repressed Economy: Evidence from India
August 1, 1998
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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.
Subject: Budget planning and preparation, Expenditure, Financial institutions, Fiscal policy, Government debt management, Public financial management (PFM), Stocks
Keywords: Budget planning and preparation, budget surplus, central government, financial repression, fiscal policy, fiscal surplus, Government debt management, government spending, India, North America, Stocks, surplus granger, Tax smoothing, tax-smoothing hypothesis, tax-smoothing model, tax-smoothing surplus, tax-Smoothing surplus, WP
Pages:
43
Volume:
1998
DOI:
Issue:
122
Series:
Working Paper No. 1998/122
Stock No:
WPIEA1221998
ISBN:
9781451854466
ISSN:
1018-5941
