The international transmission of US tax shocks: a proxy-SVAR approach

Luca Metelli () and Filippo Natoli

No 1223, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We investigate the international propagation of tax rate shocks originating in the United States using a global vector error-correction model (GVAR). We identify shocks to corporate and personal income tax rates by using narrative series as external instruments, following the proxy-SVAR methodology. The main results of the paper are the following: (1) the domestic effects of corporate tax shocks are stronger than those of personal income tax shock; (2) spillovers are in most cases positive and significant, albeit of small size; (3) the boost to exports in recipient economies, stimulated both by stronger US demand and by real exchange rate depreciation vis-à-vis the US dollar, is the main transmission channel; financial channels (through long-term interest rates) also play a role.

Keywords: international fiscal spillovers; proxy SVAR; GVAR (search for similar items in EconPapers)
JEL-codes: C22 E62 F42 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-acc, nep-mac and nep-ore
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The International Transmission of US Tax Shocks: A Proxy-SVAR Approach (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1223_19

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