Debt and Taxes in War and Peace: The Closed Economy Case
This paper examines the role of budget deficits and surpluses in smoothing tax rates in stochastic world. A previous paper considered this problem in the case of an open economy in which factor prices were given by trade or capital mobility (Flemming, 1987). The earlier treatment is summarised in Section 2 below.
KeywordsPublic Good Labour Supply Public Expenditure Private Consumption Small Open Economy
Unable to display preview. Download preview PDF.
- Arrow, K. J. and Kurz, M. (1970) Public Investment, the Rate of Return and Optimal Fiscal Policy (Baltimore, MD: Johns Hopkins University Press).Google Scholar
- Currie, D. A. and Levine, P. (1985) ‘Credibility and Time Inconsistency in a Stochastic Model’. Queen Mary College, London, Research Paper, No. 36.Google Scholar
- Flemming, J. S. (1987) ‘Debt and Taxes in War and Peace: The Case of a Small Open Economy’ in Boskin, M. J., Flemming, J. S. and Gorini, S. (eds). Private Saving and Public Debt (Oxford: Blackwells).Google Scholar
- Persson, T. and Svensson, L. E. O. (1985) ‘International Borrowing and Time Consistent Fiscal Policy’, Scandinavian Journal of Economics, vol. 14, pp. 365–74.Google Scholar