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Stochastic Fiscal Policy and the Swedish Business Cycle
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
1995 (English)Report (Other academic)
Abstract [en]

In this paper we show that fluctuations in distortive taxes account for some of the key features of the Swedish post-war business cycle. The empirical fit of a simple stochastic growth model is dramatically improved when it is amended to include imperfectly predictable fluctuations in payroll taxes, consumption taxes and the degree of progressivity of income taxes. Indeed, using the simulated method of moments, SMM, we find that for large sets of conventional moments the tax-model cannot be statistically rejected, whereas a no-tax-model is always strongly rejected. In particular, allowing for stochastic fiscal policy brings the model's predicted correlation between labor input and the real wage, as well as the standard deviation of labor input and consumption relative to that of output, much more in line with the empirical evidence.

Place, publisher, year, edition, pages
Stockholm: IIES , 1995. , 38 p.
Series
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 592
Keyword [en]
business cycles, stochastic growth model, fiscal policy, simulated method of moments
National Category
Economics
Identifiers
URN: urn:nbn:se:su:diva-41923OAI: oai:DiVA.org:su-41923DiVA: diva2:343062
Available from: 2010-08-12 Created: 2010-08-12 Last updated: 2010-08-12Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf