Comparative Analysis of the Efficiency of Financing the State Budget Through Emissions, Taxes and Public Debt

Abstract

AbstractIn this study, we propose an addition to the classical ISLMBP model that changes its focus. Typically, this model is used to analyze the impact of different macroeconomics policy options on macroeconomic stabilization (the return of an economy that has deviated from long-term equilibrium to a state of full resources usage). We propose an addition to this model that describes the reaction of business owners and financial investors to the level of tax burden and (more detailed) interest rates. This allows us to consider the optimization problem of replenishing the state budget from three sources: taxes, public debt and money emission. The proposed model allows us to quantitatively study the optimal proportion between these sources of financing, taking into account the specifics of the investment climate (sensitivity of the economy to the national and international interest and tax rates).KeywordsMacroeconomicsOptimal controlEconomic policyTaxesEmissionPublic debt