A Temporary VAT Cut as Unconventional Fiscal Policy

Ruediger Bachmann, Benjamin Born, Olga Goldfayn-Frank, Georgi Kocharkov, Ralph Luetticke, Michael Weber and Michael Weber
Authors registered in the RePEc Author Service: Michael Weber

No 9399, CESifo Working Paper Series from CESifo

Abstract: We exploit the unexpected announcement of an immediate, temporary VAT cut in Germany in the second half of 2020 as a natural experiment to study the spending response to unconventional fiscal policy. We use survey and scanner data on households’ consumption expenditures and their perceived pass-through of the tax change into prices to quantify its effects. The temporary VAT cut led to a substantial relative increase in durable spending of 36% for individuals with a high perceived pass-through. Semi- and non-durable spending also increased. According to our preferred estimates, the VAT policy increased aggregate consumption spending by 34 billion Euros.

Keywords: unconventional fiscal policy; value added tax; survey data; expectations; consumption; household data (search for similar items in EconPapers)
JEL-codes: D12 E20 E21 E62 E65 H31 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Working Paper: A Temporary VAT Cut as Unconventional Fiscal Policy (2021)
Working Paper: A Temporary VAT Cut as Unconventional Fiscal Policy (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9399

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