Stochastic fiscal policy and the Swedish business cycle

Jonsson, Gunnar and Klein, Paul (1996) Stochastic fiscal policy and the Swedish business cycle Journal of Monetary Economics, 38, (2), pp. 245-268. (doi:10.1016/S0304-3932(96)01284-6).


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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.

Item Type: Article
Digital Object Identifier (DOI): doi:10.1016/S0304-3932(96)01284-6
ISSNs: 0304-3932 (print)
Keywords: business cycles, stochastic growth model, fiscal policy, simulated method of moments
ePrint ID: 188423
Date :
Date Event
October 1996Published
Date Deposited: 03 Jun 2011 12:46
Last Modified: 18 Apr 2017 02:05
Further Information:Google Scholar

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