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Fiscal Policy and Debt Dynamics in Developing Countries

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dc.contributor.authorIlzetzki, Ethan
dc.date.accessioned2012-03-19T18:02:18Z
dc.date.available2012-03-19T18:02:18Z
dc.date.issued2011-05-01
dc.description.abstractUsing a new tax database for 28 countries and a variety of econometric methods, this paper contributes to the debate on the effects of fiscal policy on economic activity in a number of ways. The analysis finds that tax cuts have a stimulative effect on economic growth in developing countries. Lowering the personal income tax rate by 1 percentage point, or cutting revenues by 1 percent of gross domestic product increases gross domestic product by 0.3-0.4 percent on impact and 0.8 percent in the long run. The author finds that cuts in personal income taxes are more effective in stimulating growth than cuts in corporate or valued added tax rates. The author incorporates debt dynamics into a fiscal vector autoregression model for a number of developing countries. Existing estimates of the effects of fiscal policy on growth use linear time-series methods, which may assess the effects of fiscal policy along a debt-path that is unsustainable. Incorporating the non-linear relationship between government expenditure, taxes, and debt alters estimates of the impact of fiscal policy on gross domestic product in several countries. In Brazil, for example, conventional time-series methods may overstate the effects of fiscal policy on gross domestic product, by ignoring the detrimental effects of debt accumulation.en
dc.identifierhttp://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110519140736
dc.identifier.doi10.1596/1813-9450-5666
dc.identifier.urihttps://hdl.handle.net/10986/3429
dc.languageEnglish
dc.relation.ispartofseriesPaper is funded by the Knowledge for Change Program (KCP),Policy Research working paper ; no. WPS 5666
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectADDED TAX
dc.subjectAUTOREGRESSION
dc.subjectBOND
dc.subjectCD
dc.subjectCLOSED ECONOMIES
dc.subjectCORPORATE INCOME TAX
dc.subjectCORPORATE TAX
dc.subjectCORPORATE TAX RATE
dc.subjectCORPORATE TAXES
dc.subjectDEBT
dc.subjectDEBT ACCUMULATION
dc.subjectDEDUCTIONS
dc.subjectDEVELOPING COUNTRIES
dc.subjectDEVELOPMENT POLICY
dc.subjectECONOMIC OUTLOOK
dc.subjectELASTICITY
dc.subjectEXCHANGE RATE
dc.subjectEXPENDITURES
dc.subjectFEDERAL TAX
dc.subjectFISCAL POLICY
dc.subjectFIXED EXCHANGE RATES
dc.subjectFLEXIBLE EXCHANGE RATES
dc.subjectFOREIGN CURRENCY
dc.subjectGDP
dc.subjectGINI COEFFICIENT
dc.subjectGOVERNMENT ACCOUNTS
dc.subjectGOVERNMENT EXPENDITURE
dc.subjectGOVERNMENT REVENUE
dc.subjectGROSS DOMESTIC PRODUCT
dc.subjectHOUSEHOLD INCOME
dc.subjectINCOME TAX
dc.subjectINCOME TAXES
dc.subjectINFLATION
dc.subjectINTEREST PAYMENTS
dc.subjectINTEREST RATE
dc.subjectINTERNATIONAL BANK
dc.subjectINTERNATIONAL FINANCE
dc.subjectM2
dc.subjectMACROECONOMICS
dc.subjectMULTIPLIERS
dc.subjectNET DEBT
dc.subjectOPEN ECONOMIES
dc.subjectOUTPUT
dc.subjectPERSONAL INCOME
dc.subjectPERSONAL INCOME TAX
dc.subjectPERSONAL INCOME TAXES
dc.subjectPROGRESSIVE TAX
dc.subjectPUBLIC FINANCE
dc.subjectREGRESSIVE TAX
dc.subjectSALES TAX
dc.subjectSALES TAXES
dc.subjectSOCIAL SECURITY TAX
dc.subjectSTATUTORY TAX
dc.subjectSTATUTORY TAX RATES
dc.subjectTAX
dc.subjectTAX BRACKETS
dc.subjectTAX CHANGES
dc.subjectTAX CREDIT
dc.subjectTAX CUTS
dc.subjectTAX RATE
dc.subjectTAX RATES
dc.subjectTAX REVENUE
dc.subjectTAX REVENUES
dc.subjectTRADING
dc.subjectUNEMPLOYMENT
dc.subjectUNEMPLOYMENT RATE
dc.subjectVALUE ADDED
dc.subjectVALUE ADDED TAX
dc.subjectWORLD DEVELOPMENT INDICATORS
dc.titleFiscal Policy and Debt Dynamics in Developing Countriesen
dspace.entity.typePublication
okr.crossref.titleFiscal Policy and Debt Dynamics in Developing Countries
okr.date.disclosure2011-05-01
okr.date.doiregistration2025-04-10T11:28:11.236022Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110519140736
okr.guid850821468325230387
okr.identifier.doi10.1596/1813-9450-5666
okr.identifier.externaldocumentum000158349_20110519140736
okr.identifier.internaldocumentum14219586
okr.identifier.reportWPS5666
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2011/05/19/000158349_20110519140736/Rendered/PDF/WPS5666.pdfen
okr.region.administrativeThe World Region
okr.region.administrativeThe World Region
okr.sectorPublic Administration, Law, and Justice :: Central government administration
okr.unitDevelopment Research Group (DECRG)
okr.unitDECRG: Macroeconomics & Growth (DECMG)
okr.volume1 of 1
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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