Skip to main content

The dynamic effects of tax policies in a small open economy

Buy Article:

$53.17 plus tax (Refund Policy)

Abstract:

We develop an intertemporal optimizing model of a small open economy with both durable and nondurable consumption to address the implications of alternative tax policies. An increase in lump sum taxes reduces the steady state level of consumption and improves the stock of foreign bonds. Consistent with empirical evidence, durable consumption exhibits initial excess volatility. Though an increase in the tax on durables increases the demand for nondurables and improves the bond holdings in the steady state, an increase in the tax on nondurables has insignificant effects on the stock of foreign bonds and the consumption of durables. Using quarterly data from the UK and estimating generalized impulse response functions we find empirical support. We also calibrate the welfare implications of different tax policies.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840801964856

Affiliations: Department of Economics, 514 Stokely Management Center, University of Tennessee, Knoxville, TN 37996, USA

Publication date: September 1, 2010

More about this publication?
routledg/raef/2010/00000042/00000024/art00004
dcterms_title,dcterms_description,pub_keyword
6
5
20
40
5

Access Key

Free Content
Free content
New Content
New content
Open Access Content
Open access content
Subscribed Content
Subscribed content
Free Trial Content
Free trial content
Cookie Policy
X
Cookie Policy
Ingenta Connect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more