Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

The Great Recession and worldwide financial crisis have exploded fiscal imbalances and brought fiscal policy and inflation to the forefront of policy concerns. Those concerns will only grow as aging populations increase demands on government expenditures in coming decades. It is widely perceived that fiscal policy is inflationary if and only if it leads the central bank to print new currency to monetize deficits. Monetization can be inflationary. But it is a misperception that this is the only channel for fiscal inflations. Nominal bonds, the predominant form of government debt in advanced economies, derive their value from expected future nominal primary surpluses and money creation; changes in the price level can align the market value of debt to its expected real backing. This introduces a fresh channel, not requiring explicit monetization, through which fiscal deficits directly affect inflation. The paper describes various ways in which fiscal policy can directly affect inflation and explains why these fiscal effects are difficult to detect in time series data.

Zonder onderwerpscode: economie

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

News - or foresight - about future economic fundamentals can create rational expectations equilibria with non-fundamental representations that pose substantial challenges to econometric efforts to recover the structural shocks to which economic agents react. Using tax policies as a leading example of foresight, simple theory makes transparent the economic behavior and information structures that generate non-fundamental equilibria. Econometric analyses that fail to model foresight will obtain biased estimates of output multipliers for taxes; biases are quantitatively important when two canonical theoretical models are taken as data generating processes. Both the nature of equilibria and the inferences about the effects of anticipated tax changes hinge critically on hypothesized information flows. Different methods for extracting or hypothesizing the information flows are discussed and shown to be alternative techniques for resolving a non-uniqueness problem endemic to moving average representations.

Taxation. --- Fiscal policy. --- Information theory in economics. --- Economic cybernetics --- Econometrics --- Tax policy --- Taxation --- Economic policy --- Finance, Public --- Duties --- Fee system (Taxation) --- Tax reform --- Taxation, Incidence of --- Taxes --- Revenue --- Government policy --- Investments: Bonds --- Public Finance --- Fiscal Policy --- Fiscal Policies and Behavior of Economic Agents: General --- General Financial Markets: General (includes Measurement and Data) --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- National Government Expenditures and Related Policies: General --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Tax Law --- Investment & securities --- Econometrics & economic statistics --- Public finance & taxation --- Welfare & benefit systems --- Macroeconomics --- Taxation & duties law --- Municipal bonds --- Vector autoregression --- Expenditure --- Labor taxes --- Fiscal policy --- Financial institutions --- Econometric analysis --- Tax law --- Bonds --- Expenditures, Public --- Income tax --- Law and legislation --- United States

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

The paper explores the macroeconomic consequences of fiscal consolidations whose timing and composition are uncertain. Drawing on the evidence in Alesina and Ardagna (2010), we emphasize whether or not the fiscal consolidation is driven by tax rises or expenditure cuts. We find that the composition of the fiscal consolidation, its duration, the monetary policy stance, the level of government debt and expectations over the likelihood and composition of fiscal consolidations all matter in determining the extent to which a given consolidation is expansionary and/or successful in stabilizing government debt.