International evidence on the tax- and revenue-smoothing hypotheses

This paper tests Barro's tax-smoothing hypothesis and Mankiw's revenue- smo othing hypothesis, using quarterly data for four countries-Canada, France, the UK, and the US. The tests are conducted using recent advances in the th eory of integrated regressors, the single-equation approach (with the time series properties of the data imposed in estimation and hypothesis testing) as well as the multi-equation VAR approach, which treats all variables as part of a joint process. There is considerable evidence for tax-smoothing ( and inflation- smoothing) but not for revenue-smoothing.