A Reconciliation of SVAR and Narrative Estimates of Tax Multipliers

Morten Ravn and Karel Mertens

No 8973, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Existing empirical estimates of US nationwide tax multipliers vary from close to zero to very large. Using narrative measures as proxies for structural shocks to total tax revenues in an SVAR, we estimate tax multipliers at the higher end of the range: around two on impact and up to three after 6 quarters. We show that earlier findings of lower multipliers can be explained by an output elasticity of tax revenues assumption that is contradicted by empirical evidence or by failure to account for measurement error in narrative series of tax shocks.

Keywords: Fiscal policy; Measurement error; Narrative identification; Tax changes; Vector autoregressions (search for similar items in EconPapers)
JEL-codes: E20 E32 E62 H30 (search for similar items in EconPapers)
Date: 2012-05
New Economics Papers: this item is included in nep-mac and nep-pbe
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Citations: View citations in EconPapers (34)

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Journal Article: A reconciliation of SVAR and narrative estimates of tax multipliers (2014)
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