01869cas a2200241 a 4500 AALejournalIMF019009 230101c9999 xx r poo 0 0eng d 5.00 USD 9781484393895 1018-5941 BD-DhAAL BD-DhAAL Gbohoui, William. Do Temporary Business Tax Cuts Matter? : A General Equilibrium Analysis / William Gbohoui. Washington, D.C. : International Monetary Fund, 2019. 1 online resource (39 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper develops a dynamic general equilibrium model to assess the effects of temporary business tax cuts. First, the analysis extends the Ricardian equivalence result to an environment with production and establishes that a temporary tax cut financed by a future tax-increase has no real effect if the tax is lump-sum and capital markets are perfect. Second, it shows that in the presence of financing frictions which raise the cost of investment, the policy temporarily relaxes the financing constraint thereby reducing the marginal cost of investment. This direct effect implies positive marginal propensities to invest out of tax cuts. Third, when the tax is distortionary, the expectation of high future tax rates reduces the expected marginal return on investment mitigating the direct stimulative effects. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2019/029 Full text available on IMF http://elibrary.imf.org/view/journals/001/2019/029/001.2019.issue-029-en.xml IMF e-Library