Title: Fiscal Reform, Growth and Current Account Dynamics
Abstract:This paper examines the dynamic and long run effects of a shift from income taxes to consumption taxes in a growing small open economy. We extend the small open economy Solow-Swan model by introducing...This paper examines the dynamic and long run effects of a shift from income taxes to consumption taxes in a growing small open economy. We extend the small open economy Solow-Swan model by introducing a government sector that maintains both a balanced budget and expenditure at a constant proportion of domestic income. Switching to lower income taxes promotes economic growth and improves the current account balance, despite an instantaneous drop.Read More
Publication Year: 2007
Publication Date: 2007-09-01
Language: en
Type: preprint
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