Consumption taxes in Australia: A DSGE approach
| Authors | |
|---|---|
| Year of publication | 2017 |
| Type | Article in Proceedings |
| Conference | The 35th International Conference Mathematical Methods in Economics, Conference Proceedings. |
| MU Faculty or unit | |
| Citation | |
| Web | http://fim2.uhk.cz/mme/conferenceproceedings/mme2017_conference_proceedings.pdf |
| Field | Economy |
| Keywords | DSGE; consumption taxes; tax reform; Australia |
| Description | This paper investigates the effects of the increase in consumption taxes on Australian economy which faces the same challenges as almost all developed countries of the world. The public finances are in weak condition recovering from the last global financial crisis. Current status of demography prognoses the future decrease of working population and significant increase in the costs on health and social system. The goal is to decide whether currently discussed need of tax reform is relevant and if the proposed solution can improve the situation of public finances using a new Keynesian dynamic stochastic general equilibrium model for a small closed economy which is adjusted for the changes in consumption taxes. The effects on economy (especially on output, deficit and debt) are examined using impulse response functions of shocks in the stochastic components of the implicit tax rate. According to our results we do not suggest Australian government to implement the reform of increasing indirect taxes itself, but combine it with e.g. decrease of direct taxes as it is the main trend in fiscal policy of nowadays. |
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