Optimal Intertemporal Taxationon Consumption and the Term Structure of Government Debt [electronic resource]
- Washington, D.C. : International Monetary Fund, 1988.
- 1 online resource (20 p.)
- IMF Working Papers; Working Paper ; No. 88/115 .
- IMF Working Papers; Working Paper ; No. 88/115 .
This paper addresses the time-consistency problem of optimal policy when intertemporal prices are inflexible. For small, open economies facing given world interest rates, it shows that a consumption tax, rather than a tax on wage income, is time-consistent under a variety of circumstances, even including some cases where the optimal tax rate is not constant over time. This result, when it applies, restores the neutrality of the term structure of government debt, and reaffirms the tax-smoothing theory of debt determination.
1451942729 : 10.00 USD
1018-5941
10.5089/9781451942729.001 doi
Budget Constraint
Equation
Equations
Tax Rates
Taxation
This paper addresses the time-consistency problem of optimal policy when intertemporal prices are inflexible. For small, open economies facing given world interest rates, it shows that a consumption tax, rather than a tax on wage income, is time-consistent under a variety of circumstances, even including some cases where the optimal tax rate is not constant over time. This result, when it applies, restores the neutrality of the term structure of government debt, and reaffirms the tax-smoothing theory of debt determination.
1451942729 : 10.00 USD
1018-5941
10.5089/9781451942729.001 doi
Budget Constraint
Equation
Equations
Tax Rates
Taxation