The International Transmission of US Tax Shocks: A Proxy-SVAR Approach

Luca Metelli () and Filippo Natoli

IMF Economic Review, 2021, vol. 69, issue 2, No 2, 325-356

Abstract: Abstract We investigate the international propagation of tax rate shocks originating in the USA using a global vector error correction model. 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 are the following: (1) In terms of fiscal multiplier, 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, to a lesser extent, by real exchange rate depreciation, is the main transmission channel; and 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: 2021
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Citations: View citations in EconPapers (3)

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Working Paper: The international transmission of US tax shocks: a proxy-SVAR approach (2019)
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DOI: 10.1057/s41308-021-00136-6

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