Comparing budget repair measures for a small open economy with growing debt
We quantify the macroeconomic and welfare effects of alternative fiscal consolidation plans in the context of a small open economy. Using an overlapping generations model tailored to the Australian economy, we examine immediate and gradual eliminations of the existing fiscal deficit with (i) temporary income tax hikes, (ii) temporary consumption tax hikes and (iii) temporary transfer payment cuts. The simulation results indicate that all three fiscal measures result in favourable long-run...[Show more]
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|Source:||Journal of Macroeconomics|
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