We show that, in many countries, 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...

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,...

We show that, in many countries, 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...

We investigate the relationship between government deficits and corporate tax avoidance. We propose three channels through which government deficits can affect corporate tax avoidance, including (i) perceptions of expected tax enforcement, (ii) managers’ sense of civic duty, and (iii)...

The government influences the equilibrium size of hidden activity. Higher taxes give an incentive to evade. The provision of public services, social transfers and public employment may have offsetting effects on the underground economy. The budget constraint makes the relation between the shadow...

This paper presents a comprehensive framework examining fiscal sustainabil- ity in developing economies. It integrates public capital, labor informality, and global liquidity shocks in a two-sector DSGE model for a small open economy, revealing their intricate interplay and nonlinear impact on...

This paper provides a set of detailed estimated fiscal reaction functions for a panel of twenty industrialized countries, and it discusses commonalities and differences with regard to systematic fiscal policies across countries. In general, the countries in the panel adjust tax revenues strongly...

During the Greek crisis the wealth tax on real estate (WTRE) was increased four-fold as a percentage of GDP in order to boost fiscal revenues. This increase contributed to an essentially complete freeze of the real estate market, a considerable drop in real estate prices, and a substantial...

It is generally recognized that, in the absence of policy changes, the U.S. faces a long-term fiscal challenge. But, as a result of the 2007-09 recession, the U.S. is currently facing an unemployment crisis — the unemployment has been above or near 8 percent since February 2009. Furthermore,...