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We estimate the e§ect of worldwide tax changes on output following the narrative approach developed for the United States by Romer and Romer (2010). We use a novel dataset on value-added taxes for 51 countries (21 industrial and 30 developing) for the period 1970-2014 to identify 96 tax changes. We then use contemporaneous economic records to classify such changes as endogenous or exogenous to current (or prospective) economic conditions. In line with existing theoretical distortion-based arguments ñ and based on the exogenous tax changes ñwe Önd that the e§ect of tax changes on output is highly non-linear. The tax multiplier is essentially zero under relatively low/moderate initial tax rate levels and much larger (in absolute terms) as the initial tax rate and the size of the change in the tax rate increases. We also show that the bias introduced by misidentiÖcation of tax shocks critically depends on the procyclical or countercyclical nature of endogenous tax changes. We simultaneously evaluate the relevance of our arguments both for our global sample and for Romer and Romerís U.S. dataset.
This paper aims to provide an overview of the current state of taxation in the Latin America and Caribbean (LAC) region, and its main reform needs and options. It previews the findings of recent studies prepared or commissioned by the Inter-American Development Bank (IDB) for its forthcoming flagship publication More than Revenue: Taxation as a Development Tool in the -Development in the Americas- ... (View publication)
Latin American countries suffer from severe macroeconomic volatility. What is the link between this volatility and the sustainability of fiscal policy? Does the cause and effect relationship run only from macro to fiscal or is it a two-way street? ¿Como armar el rompecabezas fiscal? examines this relationship in the context of a search for appropriate indicators of fiscal policy sustainability. Th ... (View publication)
This paper studies the cyclical properties of two key expenditure categories (current and public investment spending) during the different phases of the business cycle (good times and bad times). Anecdotal evidence suggests that policymakers usually cannot resist the temptation of spending more on current expenditure in good times, but only pick capital expenditures to adjust during bad times. ... (View publication)
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