NDLI: Sovereign Default and Imperfect Tax Enforcement

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Sovereign Default and Imperfect Tax Enforcement

Content Provider	Scilit
Author	Pappadà, Francesco Yanos, Zylberberg
Copyright Year	2019
Description	Journal: SSRN Electronic Journal We show that tax compliance is volatile and markedly responds to fiscal policy. To explore the consequence of this novel stylized fact, we build a model of sovereign debt with limited commitment and imperfect tax enforcement. Fiscal policy persistently affects the size of the informal economy, which impact future fiscal revenues and thus default risk. This mechanism captures a key empirical regularity of economies with imperfect tax enforcement: the low sensitivity of debt price to fiscal consolidations. The interaction of imperfect tax enforcement and limited commitment strongly constrains the dynamics of optimal fiscal policy. During default crises, high tax distortions force the government towards extreme fiscal policies, notably including costly austerity spells.
Related Links	http://www.bristol.ac.uk/efm/media/workingpapers/working_papers/pdffiles/dp19714.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3400076
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.3400076
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2019-06-01
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal Mathematical Social Sciences Sovereign Default Imperfect Tax Enfor Cement Fiscal Policy
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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