Tax Smoothing in a Financially Repressed Economy Evidence from India

India has a long history of running fiscal deficits. Two broad considerations motivate a government to run a deficit: tax smoothing and tax tilting. This paper tests a version of Barro's tax-smoothing model, using Indian data for the period 1951-52 to 1996-97. The empirical results indicate tha...

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Bibliographic Details
Main Author: Cashin, Paul
Other Authors: Olekalns, Nilss, Sahay, Ratna
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1998
Series:IMF Working Papers
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Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:India has a long history of running fiscal deficits. Two broad considerations motivate a government to run a deficit: tax smoothing and tax tilting. This paper tests a version of Barro's tax-smoothing model, using Indian data for the period 1951-52 to 1996-97. The empirical results indicate that the central government of India has tax-smoothed, while the regional governments of India have not. The paper also finds evidence of tax tilting, reflected in financial repression, which has led to the accumulation of excessive public liabilities
Physical Description:43 pages
ISBN:9781451854466