Government budget constraint

Dynare help (legacy posts)
1

Dear friends, I am new in this field. I hava a trivial question that I find the lump-sum tax to total output ratio is calibrated to be higher than 0.155. Or else, the Government’s budget cannot be balanced.

Specifically, I include unemployment benefits, government consumption and current period’s bond financed previous period’s bond’ return, taxes of consumption and revenue profits, and lump-sum tax. However, the budget cannot be balanced unless lump-sum tax is enough high.

Hence, is this ratio reasonable? Thanks in advance! !

2

There is no way to generally answer this question. Sensible values will depend on the country under consideration.
That being said, it is a standard assumption that after calibrating the model to various features of the government sector, the residual is financed by lump sum transfers. The value you describe is definitely not crazy in that regard.

3

Dear Professor, thanks for your nice advice!