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Tax Policy and Uncertainty

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Tax Policy and Uncertainty

Modelling Debt Projections and Fiscal Sustainability

9781800376007 Edward Elgar Publishing
Christopher Ball, John Creedy, Victoria University of Wellington and Grant Scobie, formerly The Treasury, Wellington, New Zealand
Publication Date: November 2020 ISBN: 978 1 80037 600 7 Extent: c 192 pp
Presenting innovative modelling approaches to the analysis of fiscal policy and government debt, this book moves beyond previous models that have relied upon the assumption that various age-specific rates and policy variables remain unchanged when it comes to generating government expenditures and tax revenues. As a result of population ageing, current policy settings in many countries are projected to lead to unsustainable levels of public debt; Tax Policy and Uncertainty explores models that allow for feedbacks and uncertainty to combat this.

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Presenting innovative modelling approaches to the analysis of fiscal policy and government debt, this book moves beyond previous models that have relied upon the assumption that various age-specific rates and policy variables remain unchanged when it comes to generating government expenditures and tax revenues. As a result of population ageing, current policy settings in many countries are projected to lead to unsustainable levels of public debt; Tax Policy and Uncertainty explores models that allow for feedbacks and uncertainty to combat this.

Applicable to any country, the models in the book explore the optimal timing and extent of tax changes in the face of anticipated high future debt. Chapters produce stochastic debt projections, including probability distribution of debt ratios at each point in time. It also offers important analysis of fiscal policy trade-offs as well as providing advice on when and by how much tax rates should be increased.

Economics scholars focusing on fiscal policy will appreciate the improved models in this book that allow both for uncertainty and feedback effects arising from responses to increased debt. It will also be helpful to economic policy advisors and economists in government departments.
Critical Acclaim
‘This book develops important innovations in addressing two problems in determining short term fiscal policy according to long run fiscal projections. The first problem is the difficulty of modelling the complex interactions of macroeconomic variables that generate feedback effects from policy decisions. Second is the potential sunk costs of making irreversible tax and spending decisions in the face of significant uncertainty about future phenomena such as population ageing and climate change. The authors build their analysis carefully and in a very readable style. It should provide a useful manual for fiscal policy makers around the world.’
– Ross Guest, Griffith University, Australia

‘Anyone seeking to understand tax policy modelling under uncertainty will certainly want to consult this book.’
– James R. Hines Jr., University of Michigan, US

This title is available for institutional purchase via Elgaronline.

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eISBN: 978 1 80037 601 4
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