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|z 9781451870855
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|a 1018-5941
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|a Tervala, Juha.
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|a Tax Reforms, 'Free Lunches', and 'Cheap Lunches' in Open Economies /
|c Juha Tervala, Giovanni Ganelli.
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|a Washington, D.C. :
|b International Monetary Fund,
|c 2008.
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|a 1 online resource (30 pages)
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|a IMF Working Papers
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|a <strong>Off-Campus Access:</strong> No User ID or Password Required
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|a <strong>On-Campus Access:</strong> No User ID or Password Required
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|a Electronic access restricted to authorized BRAC University faculty, staff and students
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|a This paper focuses on the macroeconomic and budgetary impact of tax reforms in a New Keynesian two-country model. Our results show that both income and consumption unilateral tax rate reductions do not constitute a "free lunch", in the sense that they have negative budgetary consequences for the country which implements them. In addition, the degree of self-financing implied by our model is in the 8 1\2 -24 percent range. Since the degree of self-financing estimated in previous literature was larger, we conclude that in our model not only the "lunch" is not "free", but is also not that "cheap". A comparison of alternative (income-tax versus consumption-tax based) fiscal stimulus packages shows that consumption tax cuts imply a larger short-run impact on domestic output but the income tax cuts stimulate the domestic economy more in the long run. We also look at the implications of a revenue-neutral tax reform in which consumption taxes are increased to compensate for lower income tax collection.
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|a Mode of access: Internet
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|a Ganelli, Giovanni.
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|a IMF Working Papers; Working Paper ;
|v No. 2008/227
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|z Full text available on IMF
|u http://elibrary.imf.org/view/journals/001/2008/227/001.2008.issue-227-en.xml
|z IMF e-Library
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