Fundamental Determinants of the Effects of Fiscal Policy

March 1, 2006

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Format: Chicago

Manmohan S. Kumar, and Dennis P Botman. Fundamental Determinants of the Effects of Fiscal Policy, (USA: International Monetary Fund, 2006) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We explore the underlying determinants of the macroeconomic effects of fiscal policy and tax and social security reform using the Global Fiscal Model (GFM). We show that the planning horizon of consumers, access to financial markets, and the elasticity of labor supply, as well as the characteristics of utility and production functions, and the degree of competition are all critical for determining the impact of fiscal policy. Four topical fiscal policy issues, for a representative large and small economy, are examined: the effects of changes in government debt; higher government spending; tax reform; and privatization of retirement savings.

Subject: Consumption, Fiscal policy, Labor taxes, Public debt, Real interest rates

Keywords: Current account, Government debt, Government spending, Open economy, WP

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/072
Stock No:

WPIEA2006072
ISBN:

9781451863321
ISSN:

1018-5941

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