Fiscal developments and financial stress : a threshold VAR analysis

We use a threshold VAR analysis to study the linkages between changes in the debt ratio, economic activity and financial stress within different financial regimes. We use quarterly data for the US, the UK, Germany and Italy, for the period 1980:4– 2014:1, encompassing macro, fiscal and financial variables, and use nonlinear impulse responses allowing for endogenous regime-switches in response to structural shocks. The results show that output reacts mostly positively to an increase in the debt ratio in both financial stress regimes; however, the differences in estimated multipliers across regimes are relatively small. Furthermore, a financial stress shock has a negative effect on output and worsens the fiscal situation. The large time-variation and the estimated nonlinear impulse responses suggest that the size of the fiscal multipliers was higher than average in the 2008–2009 crisis.info:eu-repo/semantics/publishedVersio

Measuring Tax Attractiveness Across Countries

This paper develops a new tax measure - the Tax Attractiveness Index - reflecting the attractiveness of a country's tax environment and the tax planning opportunities that are offered. Specifically, the Tax Attractiveness Index covers 16 different components of real-world tax systems, such as the statutory tax rate, the taxation of dividends and capital gains, withholding taxes, the existence of a group taxation regime, loss offset provision, the double tax treaty network, thin capitalization rules, and controlled foreign company (CFC) rules. We develop methods to quantify each tax factor. The Tax Attractiveness Index is constructed for 100 countries over the 2005 to 2009 period. Regional clusters in the index as well as in the application of certain tax rules can be observed. The evaluation of individual countries based on the index corresponds - but is not totally identical - with the OECD's black respectively grey list. By comparing the Tax Attractiveness Index with the statutory tax rate, we reveal that even high tax countries offer favorable tax condi-tions. Hence, the statutory tax rate is not a suitable proxy for a country's tax climate in any case since countries may set other incentives to attract firms and investments