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Tax Smoothing in a Financially Repressed Economy: Evidence from India
Author:
Mr. Paul Cashin
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Nilss Olekalns null

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Ms. Ratna Sahay
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Series:
IMF Working Papers
Volume/Issue:
Volume 1998: Issue 122
Language:
English
Publication Date:
01 Aug 1998
DOI:
https://doi.org/10.5089/9781451854466.001
ISBN:
9781451854466
ISSN:
1018-5941
Pages:
43
Keywords:
WP; government spending; budget surplus; Tax smoothing; financial repression; fiscal policy; India; tax-smoothing hypothesis; tax-smoothing model; central government; tax-smoothing surplus; surplus granger; fiscal surplus; tax-Smoothing surplus; Government debt management; Budget planning and preparation; Stocks; North America
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund