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Fiscal rules and tax policy cyclicality

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  • Chrysanthakopoulos, Christos
  • Tagkalakis, Athanasios

Abstract

Using a group of 52 countries over the period 1985–2019, we assess the effect of fiscal rules on time varying measures of VAT, corporate and personal income tax rate cyclicality. We find that budget balance and revenue rules increase the degree of tax policy cyclicality, while spending rules induce a pro-cyclical tax policy response. Moreover, the specific design features of fiscal rules are significant determinants of the degree of tax policy cyclicality.

Suggested Citation

  • Chrysanthakopoulos, Christos & Tagkalakis, Athanasios, 2023. "Fiscal rules and tax policy cyclicality," Economics Letters, Elsevier, vol. 225(C).
    • Handle: RePEc:eee:ecolet:v:225:y:2023:i:c:s0165176523000605
    DOI: 10.1016/j.econlet.2023.111035
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    References listed on IDEAS

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    1. De Jong, Jasper F.M. & Gilbert, Niels D., 2020. "Fiscal discipline in EMU? Testing the effectiveness of the Excessive Deficit Procedure," European Journal of Political Economy, Elsevier, vol. 61(C).
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    More about this item

    Keywords

    Tax policy; Fiscal rules; Time-varying coefficients; Cyclicality;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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