A Real Time Tax Smoothing Based Fiscal Policy Rule
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Authors
Loukoianova, Elena
Vahey, Shaun P.
Wakerly, Elizabeth C.
Publication Date
2004-06-16Series
Cambridge Working Papers in Economics
Publisher
Faculty of Economics
Language
en_GB
Type
Working Paper
Metadata
Show full item recordCitation
Loukoianova, E., Vahey, S. P., & Wakerly, E. C. (2004). A Real Time Tax Smoothing Based Fiscal Policy Rule. https://doi.org/10.17863/CAM.5447
Abstract
In this paper we consider the real-time implementation of a fiscal policy rule based on tax smoothing (Barro (1979) and Bohn (1998)). We show that the tax smoothing approach, augmented by fiscal habit considerations, provides a surprisingly accurate description of US budget surplus movements. In order to investigate the robustness of the policy implications of the rule, we construct a real-time US fiscal data set, complementing the data documented by Croushore and Stark (2001). For each variable we record the different vintages, reflecting the remeasurements that occur over time. We demonstrate that the easily constructed rule provided a useful benchmark for policy analysis that is robust to real-time remeasurements.
Keywords
Classification-JEL: C82, E62, E66, fiscal rules, tax smoothing, fiscal habits, real-time data
Identifiers
This record's DOI: https://doi.org/10.17863/CAM.5447
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