Download or read book Financial Repression and Optimal Taxation written by Chong-En Bai and published by . This book was released on 2003 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial repression entails an implicit taxation on savings. When effective income-tax rates are very uneven, as common in developing countries, raising some government revenue through mild financial repression can be more efficient than collecting income tax only.

Download or read book A Growth Model of Inflation Tax Evasion and Financial Repression written by Nouriel Roubini and published by . This book was released on 1992 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we study the effects of policies of financial repression on long term growth and try to explain why optimizing governments might want to repress the financial sector. We also explain why inflation may be negatively related to growth, even though it does not affect growth directly. We argue that the main reason why governments repress the financial sector is that this sector is the source of "easy" resources for the public budget The source of revenue stemming from this intervention is modeled through the inflation tax. Our model has the implication that financial development reduces money demand. Hence, if the government allows for financial development the inflation tax base, and the chance to collect seigniorage, is reduced. To the extent that the financial sector increases the efficiency of the allocation of savings to productive investment, the choice of the degree of financial development will have real effects on the saving and investment rate and on the growth rate of the economy. We show that in countries where tax evasion is large the government will optimally choose to repress the financial sector in order to increase seigniorage taxation. This policy will then reduce the efficiency of the financial sector, increase the costs of intermediation, reduce the amount of investment and reduce the steady state rate of growth of the economy. Financial repression will therefore be associated with high tax evasion, low growth and high inflation.

Download or read book Tax Smoothing in a Financially Repressed Economy written by Mr.Paul Cashin and published by International Monetary Fund. This book was released on 1998-08-01 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Optimal Financial Repression written by Olga Alekseevna Norkina and published by . This book was released on 2014 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: Modern financial repression in advanced economies does not rely on increasing seigniorage revenue, but mostly rests upon regulatory measures to enlarge the demand for public debt that delivers extremely low or negative real interest rate. In this paper we propose the extension of the overlapping generations model to question the optimality of financial repression in the form of non-market placement of the public debt in the captive pension fund. We show that financial repression and capital income taxation are not perfect substitutes. The optimal degree of financial repression depends on the growth rate of population. Moreover, the benevolent government makes a decision to confiscate some part of the pension wealth.

Download or read book Supply Side Tax Policy written by Mr.Liam P. Ebrill and published by International Monetary Fund. This book was released on 1987-06-15 with total page 404 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written by Ved P. Gandhi, Liam P. Ebrill, George A. Mackenzie, Luis Mañas-Antón, Jitendra R. Modi, Somchai Richupan, Fernando Sanchez-Ugarte, and Parthasarathi Shome, this book contains 12 articles. It examines the relevance to developing countries of the tax policy recommendations of supply-side economists and attempts to delineate policy guidelines to ensure that fiscal management enhances rather than inhibits growth and efficiency in the wider economy.

Download or read book The Liquidation of Government Debt written by Ms.Carmen Reinhart and published by International Monetary Fund. This book was released on 2015-01-21 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: High public debt often produces the drama of default and restructuring. But debt is also reduced through financial repression, a tax on bondholders and savers via negative or belowmarket real interest rates. After WWII, capital controls and regulatory restrictions created a captive audience for government debt, limiting tax-base erosion. Financial repression is most successful in liquidating debt when accompanied by inflation. For the advanced economies, real interest rates were negative 1⁄2 of the time during 1945–1980. Average annual interest expense savings for a 12—country sample range from about 1 to 5 percent of GDP for the full 1945–1980 period. We suggest that, once again, financial repression may be part of the toolkit deployed to cope with the most recent surge in public debt in advanced economies.

Download or read book Financial Repression and Laffer Curves written by Kanat Isakov and published by . This book was released on 2015 with total page 10 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses a simple calibrated general equilibrium model to evaluate the revenue from financial repression and its impact on Laffer curves for consumption, capital and labor taxes. By imposing a requirement for households to hold public debt with a below-market rate of return the government distorts optimal household allocation and raises extra revenues. Tighter financial repression shifts Laffer curves for labor and consumption down, but increases revenue from capital income taxation. Total budget revenue increases, which allow financing more public goods and can be welfare-improving.

Download or read book Spend Now Pay Later Tax Smoothing and Fiscal Sustainability in South Asia written by International Monetary Fund and published by International Monetary Fund. This book was released on 1999-05-01 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper tests a version of Barro’s tax-smoothing model, which assumes intertemporal optimization by a government seeking to minimize the distortionary costs of taxation, using Pakistan and Sri Lankan data for 1956-95 and 1964-97, respectively. The empirical results indicate that Pakistan’s fiscal behavior is consistent with tax smoothing, but not Sri Lanka’s. Moreover, fiscal behavior in both countries was dominated by a stagnation of revenues, large tax-tilting-induced deficits, and the consequent accumulation of excessive public liabilities. Analysis of the time-series characteristics of tax-tilting behavior indicates that for both countries the stock of public liabilities is unsustainable under unchanged fiscal policies.

Download or read book Essays in Public Debt and Taxation written by Neelanjan Datta and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Public debt and taxation are central concerns of economic policy, with important implications for growth, equity, and stability. This dissertation consists of three essays that examine different aspects of these issues, using a combination of theoretical and empirical methods.The first chapter asks the question - can fiscal rules act as private investment stimulus policy? Such rules impose constraints on fiscal policy through mandated limits on government borrowings. Using annual balance sheet data from the universe of Indian firms that publicly release their annual balance sheet statements, and by exploiting the staggered adoption of the Fiscal Responsibility and Budget Management (FRBM) Act by the Indian states, I find that a state's fiscal rule adoption leads an average firm located in the state to increase its stock of fixed capital at the end of the next financial year by USD1.59 million (the pre-treatment sample average is USD10.2 million). To understand the mechanism, I introduce fiscal rules into the framework of Chari, Dovis, and Kehoe (2020). Analytically characterizing the equilibrium dynamics of public debt, private investment, and bank deposits in a dynamic model of optimal taxation with fiscal rules and endogenous financial repression, I show that borrowing constraints on the government will stimulate private investment if the government is unable to commit to repay its existing debt. In this case, banks are forced to hold government bonds, and a fiscal rule causes ”crowding-in” of investment and a commensurate decline in government borrowings from such financially repressed banks. Empirical evidence from state-level banking and public finance data provides support for this mechanism. Fiscal rules can be welfare-improving if the welfare loss from less tax-smoothing is dominated by the welfare gains from less crowding-out of valuable private investment.This provides a welfare-based rationale for the adoption of the FRBM Act by the federal and state governments in India, and contributes to the broader policy debate on fiscal restraints.The second chapter focuses on intergovernmental transfers in the form of loans and grants between a central government and state governments in a federal economy, and how political distortions can affect these transfers. I consider a multi-period political agency model where, in each period, a coalition government at the center has complete discretion over the amount of loans and grants it may give to different states, taking state elections that happen between periods into consideration. State incumbents tax their electorate, and exert effort to produce a local public good. The key feature of the model is that retrospective voters can perceive their tax burden, but can not observe center-state fiscal transfers. The main theoretical result is that the interaction between the extent of alignment of a state with the center, and how swing the state is in elections, affects the fraction of total transfers it receives in the form of loans, with this ratio being a decreasing function of the interactive term. Predictions from the model are tested using novel data from the Indian states over the period 1991-2019, and estimates suggest that an aligned state which is one standard deviation below the average aligned state in terms of the extent of alignment (as measured by the fraction of central cabinet portfolios held by the leading party in the state), and has the same degree of swing-ness (as measured by the fraction of seats assigned to the state in the national legislature that is controlled by the leading party at the center) as the average aligned state, has a 5.44% larger loans to total transfers ratio.Finally, in the third chapter (coauthored with Parimal Bag and Peng Wang), we examine how neighborhood information alters equilibrium auditing policy in tax enforcement. There is increasing reliance on data-driven auditing of businesses and proprietorship. However, the tax returns have garbled signals that are further confounded due to underreporting. We consider a model where entrepreneurs' profits depend on their individual types and a common market shock. A low ability, high profit earner underreports only when she observes her neighbor to have earned low profits: neighborhood information about the performance of other entrepreneurs in the same business prompts such strategic reporting, making the volume statistic of 'high submissions' a meaningful indicator of the market shock. In response auditors scrutinize all low profit returns only if the proportion of high submissions exceeds a threshold cutoff. Because this cutoff is endogenous and depends on the stochastic types and market shock, tax returns cannot systematically avoid audit scrutiny as in exogenous cutoff tax returns models. Auditing is enriched to combat the high 'tax gap', a well-known problem in tax enforcement.

Download or read book Costly Tax Enforcement and Financial Repression written by Rangan Gupta and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using an overlapping generations production-economy model characterized by financial repression, purposeful government expenditures and cost of tax collection, we analyse whether financial repression can be explained by the cost of raising taxes. We show that with public expenditures affecting utility of the agents, modest costs of tax collection tend to result in financial repression being pursued as an optimal policy by the consolidated government. However, when public expenditures are purposeless, the above result only holds for relatively higher costs of tax collection. But, more importantly, costs of tax collection cannot produce a monotonic increase in the reserve requirements. What are critical, in this regard, are the weights the consumer assigns to the public good in the utility function and the size of the government.

Download or read book Financial Repression is Knocking at the Door Again written by Mr.Etibar Jafarov and published by International Monetary Fund. This book was released on 2019-09-30 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial repression (legal restrictions on interest rates, credit allocation, capital movements, and other financial operations) was widely used in the past but was largely abandoned in the liberalization wave of the 1990s, as widespread support for interventionist policies gave way to a renewed conception of government as an impartial referee. Financial repression has come back on the agenda with the surge in public debt in the wake of the Global Financial Crisis, and some countries have reintroduced administrative ceilings on interest rates. By distorting market incentives and signals, financial repression induces losses from inefficiency and rent-seeking that are not easily quantified. This study attempts to assess some of these losses by estimating the impact of financial repression on growth using an updated index of interest rate controls covering 90 countries over 45 years. The results suggest that financial repression poses a significant drag on growth, which could amount to 0.4-0.7 percentage points.

Download or read book Government Revenue from Financial Repression written by Alberto Giovannini and published by World Bank Publications. This book was released on 1991 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents an analysis of the theoretical underpinnings and the relevance of the phenomenon of financial repression from a public-finance perspective. The analysis explicitly accounts for the interaction between capital controls and financial repression. The proposed empirical estimate of the revenue from financial repression is based on the difference between the domestic and the foreign cost of borrowing of the government. The correlations of the revenue from financial repression with inflation, exchange rates and per-capita income are discussed.

Download or read book Financial Deepening in Economic Development written by Edward S. Shaw and published by Oxford University Press, USA. This book was released on 1973-01-01 with total page 260 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Managing the Sovereign Bank Nexus written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 2018-09-07 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.

Download or read book Financial Development and Economic Growth written by Mr.Pablo Emilio Guidotti and published by International Monetary Fund. This book was released on 1992-12-01 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the empirical relationship between long–run growth and the degree of financial development, proxied by the ratio of bank credit to the private sector as a fraction of GDP. We find that this proxy enters significantly and with a positive sign in growth regressions on a large cross–country sample, but with a negative sign using panel data for Latin America. Our findings suggest that the main channel of transmission from financial development to growth is the efficiency of investment, rather than its volume. We also present a model where the negative correlation between financial intermediation and growth results from financial liberalization in a poor regulatory environment.

Download or read book Coordination of Monetary and Fiscal Policies written by International Monetary Fund and published by International Monetary Fund. This book was released on 1998-03-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recently, monetary authorities have increasingly focused on implementing policies to ensure price stability and strengthen central bank independence. Simultaneously, in the fiscal area, market development has allowed public debt managers to focus more on cost minimization. This “divorce” of monetary and debt management functions in no way lessens the need for effective coordination of monetary and fiscal policy if overall economic performance is to be optimized and maintained in the long term. This paper analyzes these issues based on a review of the relevant literature and of country experiences from an institutional and operational perspective.

Download or read book Financial Crises Explanations Types and Implications written by Mr.Stijn Claessens and published by International Monetary Fund. This book was released on 2013-01-30 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.