Found 472 article(s) in category 'Fiscal Policy'

The $700 Billion Question

The $700 Billion Question. Jeremy Stein, September 23, 2008, Op-Ed. “Henry Paulson, the Treasury secretary, has opened the government checkbook and is poised to spend $700 billion to end the financial crisis. What comes next depends on the precise mission and operating powers he and Congress assign the new Treasury agency that will oversee the bailout. We see four broad possibilities. First, the agency could act as a deep-pocketed private investor that sees a bargain-buying opportunity – Warren Buffet on steroids. This strategy makes sense if one believes that the crises has caused the prices…” (May require user account or purchase) Link

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WHY IS FISCAL POLICY OFTEN PROCYCLICAL?

WHY IS FISCAL POLICY OFTEN PROCYCLICAL? Alberto Alesina, Filipe R. Campante, September 2008, Paper. “Fiscal policy is procyclical in many developing countries. We explain this policy failure with a political agency problem. Procyclicality is driven by voters who seek to “starve the Leviathan” to reduce political rents. Voters observe the state of the economy but not the rents appropriated by corrupt governments. When they observe a boom, voters optimally demand more public goods or lower taxes, and this induces a procyclical bias in fiscal policy. The empirical evidence is consistent with this explanation…” Link

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In search of the chains that hold Brazil back

In search of the chains that hold Brazil back, Ricardo Hausmann, September 2008, Paper, This paper performs a Growth Diagnostic for Brazil. It shows that many aspects of the Brazilian economy have been improving including the macro picture, educational progress and the external front. Moreover, Brazil has many productive possibilities and high-return investments. Yet growth is hampered because of a relatively old-fashioned problem that has been solved in many other countries in the region: creating a financially viable state that does not over-borrow, over-tax or under-invest. We show that domestic saving is the binding constraint on growth and that it has a fiscal cause. Although things are trending in the right direction, the challenge is to exploit the current good times to create the fiscal basis for a sustained growth acceleration. Link

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The growing current account surpluses in East Asia: the effect of dark matter assets

The growing current account surpluses in East Asia: the effect of dark matter assets. Ricardo Hausmann, June 12, 2008, Paper. “In a series of papers we have developed the notion that net foreign assets could be better approximated by capitalizing the net investment income line of the balance of payments statistics. Hidden assets or changes in financial costs may change the net return of net foreign assets even when the valuation of assets remains unchanged. By capitalizing the net investment income a more realistic picture emerges on the true burden or return of net foreign assets. This paper estimates external positions for East Asian economies…” Link

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Stabilizing State and Local Budgets: A Proposal for Tax-base Insurance

Stabilizing State and Local Budgets: A Proposal for Tax-base Insurance. Akash Deep, Robert Lawrence, June 1, 2008, Paper. “When the federal government suffers a temporary economic downturn that reduces tax revenue, the optimal response is generally to finance temporarily higher deficits with borrowing. When states and localities suffer a temporary shock, however they generally do not have this option because of their balanced budget rules. Instead they are forced to cut spending or raise taxes immediately. Akash Deep and Robert Lawrence, economists at the Harvard Kennedy School, propose a federal tax-base insurance program to help states get through a sudden reduction in tax revenue…Link

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Productivity Growth and Countercyclical Budgetary Policy: What Do We Learn from OECD Panel Data?

Productivity Growth and Countercyclical Budgetary Policy: What Do We Learn from OECD Panel Data? Philippe Aghion, June 2008, Paper. “A common view among macroeconomists is that there is a decoupling between macroeconomic policy (e.g., budget deficit, taxation, money supply), which should primarily affect price and income stability and long-run economic growth, which, if anything, should depend only upon structural characteristics of the economy (property right enforcement, market structure, market mobility, and so forth). That macroeconomic policy should not be a key determinant of growth…” Link

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Smart Taxes: An Open Invitation to Join the Pigou Club

Smart Taxes: An Open Invitation to Join the Pigou Club. N. Gregory Mankiw, March 8, 2008, Paper. “Many economists favor higher taxes on energy-related products such as gasoline, while the general public is more skeptical. This essay discusses various aspects of this policy debate. It focuses, in particular, on the use of these taxes to correct for various externalities—an idea advocated long ago by British economist Arthur Pigou.” Link

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Assessing pacification policy in Iraq: Evidence from Iraqi financial markets

Assessing pacification policy in Iraq: Evidence from Iraqi financial markets. Eric Chaney, 2008, Paper. “At the end of January, 2006 the Iraqi government issued roughly $2.7 billion of debt in exchange for over $20 billion of Saddam-era commercial claims. This paper uses variation in the yield spread of this sovereign debt to evaluate pacification policy in Iraq. Structural change models are run in conjunction with conventional event study analysis. Results detail a mixed market reaction towards pacification policies implemented through August, 2006…” May require purchase or user account. Link

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The Optimal Taxation of Height: A Case Study of Utilitarian Income Redistribution

The Optimal Taxation of Height: A Case Study of Utilitarian Income Redistribution. N. Gregory Mankiw, Matthew Weinzierl, December 2007, Paper. “Should the income tax system include a tax credit for short taxpayers and a tax surcharge for tall ones? This paper shows that the standard Utilitarian framework for tax policy analysis answers this question in the affirmative. Moreover, based on the empirical distribution of height and wages, the optimal height tax is substantial: a tall person earning $50,000 should pay about $4,500 more in taxes than a short person earning the same income. This result has…” Link

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The Valuation of Hidden Assets in Foreign Transactions: Why “Dark Matter” Matters

The Valuation of Hidden Assets in Foreign Transactions: Why “Dark Matter” Matters. Ricardo Hausmann, May 27, 2007, Paper. “This paper clarifies how the valuation of hidden assets—what we call “dark matter”—changes our assessment of the U.S. external imbalance. Dark matter assets are defined as the capitalized value of the return privilege obtained by U.S. assets. Because this return privilege has been steady over recent decades, it is likely to persist in the future or even to increase, as it becomes leveraged by…”  May require purchase or user account. Link

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