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Title: Essays on fiscal sustainability and tax smoothing and fiscal policy simulation experiments for Sri Lanka
Keywords: Fiscal sustainability, Tax smoothing, Cointegration, Macroeconometric modelling, Government spending, Policy simulation.
Issue Date: 8-Dec-2006
Citation: J.M.A. JAYAWICKRAMA (2006-12-08). Essays on fiscal sustainability and tax smoothing and fiscal policy simulation experiments for Sri Lanka. ScholarBank@NUS Repository.
Abstract: ABSTRACTWe incorporate rational expectations in the present-value budget constraint to derive a more flexible framework for fiscal sustainability. Using the US federal budgetary data for 1929-2004, we draw evidence in favour of the sustainability hypothesis despite the observed very divergent movements in deficits and debt series. Second, we propose a new theoretical and empirical framework for the tax smoothing hypothesis. In this framework, we show that the tax smoothing hypothesis is valid if tax rate at time t and permanent expenditure rate at time t-1 are cointegrated. Results, based on cointegration test and a VECM using six OECD country data, emerge in favour of the weak form of tax smoothing. Third, we examine the macroeconomic impacts of various government expenditures in Sri Lanka. Results show that low government investment spending has a significant negative impact on the economy while low government consumption expenditure and transfer payments leave many macro variables unchanged.
Appears in Collections:Ph.D Theses (Open)

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