Discretionary Tax Changes and the Macroeconomic Activity: New Narrative Evidence from Australia

Changchen Ge

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper investigates the effects of discretionary tax changes on economic activity in Australia. Using official records, including Budget Reports and Election Speeches, I construct a narrative-based dataset that identifies the revenue impact, timing, and motivation of all major Commonwealth tax policy changes from 1983Q4 to 2018Q4. This approach enables the identification of legislated tax changes that are unrelated to contemporaneous economic conditions. To estimate their macroeconomic effects, I use unanticipated exogenous tax changes as an instrument for tax revenue. The results indicate that tax cuts stimulate economic activity in the short run through consumption and investment; however, these gains are offset within two years due to contractionary monetary policy and a deterioration in the trade balance.

Keywords: narrative approach; tax multiplier; Australia (search for similar items in EconPapers)
JEL-codes: E32 E62 H20 N17 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2024-10, Revised 2025-05
New Economics Papers: this item is included in nep-pbe and nep-pub
References: Add references at CitEc
Citations:

Downloads: (external link)
https://crawford.anu.edu.au/sites/default/files/20 ... _Revised_May2025.pdf Revised Version (application/pdf)
https://crawford.anu.edu.au/sites/default/files/20 ... Original_Oct2024.pdf Original Version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2024-63

Access Statistics for this paper

More papers in CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Cama Admin ().