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| Author: | Calvo, G.A. |
| Title: | Exploring sudden stop, growth collapse, and BOP crisis: the case of distortionary output taxes |
| Journal: | IMF Staff papers
2003 : VOL. 50: Special issue, p. 1-20 |
| Index terms: | Balance of payments Economic crisis Fiscal policy Growth Taxation |
| Language: | eng |
| Abstract: | A model in which growth is a negative function of fiscal burden is discussed in this article. Moreover, growth discontinuously switches from high to low as fiscal burden reaches a critical level. Growth collapse is associated with a sudden stop of capital inflows, real depreciation and a drop in output (driven by a fall in the output of nontradables) - all of which have occurred during recent financial crises in emerging markets. The monetary version of the model is employed to show that balance of payments (BOP) crises could be a result of fiscal distortions. |
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