Stochastic fiscal policy and the Swedish business cycle
Stochastic fiscal policy and the Swedish business cycle
In this paper we show that fluctuations in distortive taxes can account for some of the key features of the Swedish post-war business cycle. The empirical fit of a simple stochastic growth model is significantly improved when it is amended to include imperfectly predictable fluctuations in payroll taxes, consumption taxes, and government consumption. Indeed, using the simulated method of moments, SMM, we find that, for large sets of conventional moments, models with stochastic fiscal policy cannot be statistically rejected, whereas a model without it is always rejected.
business cycles, stochastic growth model, fiscal policy, simulated method of moments
245-268
Jonsson, Gunnar
dc786ddf-f923-44d4-8dab-1ff2943b523b
Klein, Paul
feea4bea-ca95-41ce-b72c-92b7d05247b1
October 1996
Jonsson, Gunnar
dc786ddf-f923-44d4-8dab-1ff2943b523b
Klein, Paul
feea4bea-ca95-41ce-b72c-92b7d05247b1
Jonsson, Gunnar and Klein, Paul
(1996)
Stochastic fiscal policy and the Swedish business cycle.
Journal of Monetary Economics, 38 (2), .
(doi:10.1016/S0304-3932(96)01284-6).
Abstract
In this paper we show that fluctuations in distortive taxes can account for some of the key features of the Swedish post-war business cycle. The empirical fit of a simple stochastic growth model is significantly improved when it is amended to include imperfectly predictable fluctuations in payroll taxes, consumption taxes, and government consumption. Indeed, using the simulated method of moments, SMM, we find that, for large sets of conventional moments, models with stochastic fiscal policy cannot be statistically rejected, whereas a model without it is always rejected.
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Published date: October 1996
Keywords:
business cycles, stochastic growth model, fiscal policy, simulated method of moments
Identifiers
Local EPrints ID: 188423
URI: http://eprints.soton.ac.uk/id/eprint/188423
ISSN: 0304-3932
PURE UUID: 003c023a-27be-4644-8e23-62782f4afaa4
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Date deposited: 03 Jun 2011 12:46
Last modified: 14 Mar 2024 03:31
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Author:
Gunnar Jonsson
Author:
Paul Klein
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