Theory of tax smoothing in the small open economy

Lance A. Fisher, Geoffrey H. Kingston*

*Corresponding author for this work

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

We derive necessary and sufficient conditions for the martingale-like behavior of tax rates. The world real interest rate is exogenous to the small domestic economy. Consumers are risk averse and markets are incomplete. The government's loss function is not ad hoc.

Original languageEnglish
Pages (from-to)1-7
Number of pages7
JournalEconomics Letters
Volume85
Issue number1
DOIs
Publication statusPublished - Oct 2004
Externally publishedYes

Keywords

  • Incomplete markets
  • Martingale
  • Ramsey problem
  • Small open economy

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