Empirical Evidence on the Aggregate Effects of Anticipated and Unanticipated US Tax Policy Shocks

Karel Mertens () and Morten Overgaard Ravn ()

American Economic Journal: Economic Policy, 2012, vol. 4, issue 2, pages 145-81

Abstract: We provide evidence on the dynamic effects of tax liability changes in the United States. We distinguish between surprise and anticipated tax changes. Preannounced but not yet implemented tax cuts give rise to contractions in output, investment, and hours worked while real wages increase. There are no significant anticipation effects on aggregate consumption. Implemented tax cuts, regardless of their timing, have expansionary effects, on output, consumption, investment, hours worked, and real wages. Results are shown to be robust. Tax shocks are important impulses to the US business cycle and anticipation effects have been important during several business cycle episodes. (JEL E23, E32, E62, H20, H30)

JEL-codes: E23 E32 E62 H20 H30 (search for similar items in EconPapers)
Date: 2012
Note: DOI: 10.1257/pol.4.2.145
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Related works:
Working Paper: Empirical Evidence on the Aggregate Effects of Anticipated and Unanticipated U.S. Tax Policy Shocks (2010)
Working Paper: Empirical Evidence on the Aggregate Effects of Anticipated and Unanticipated U.S. Tax Policy Shocks (2009)
Working Paper: Empirical evidence on the aggregate effects of anticipated and unanticipated US tax policy shocks (2009)
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