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Unconventional Fiscal Policy

Francesco D'Acunto, Daniel Hoang and Michael Weber ()

AEA Papers and Proceedings, 2018, vol. 108, 519-23

Abstract: Unconventional fiscal policy uses announcements of future increases in consumption taxes to generate inflation expectations and accelerate consumption expenditure. It is budget neutral and time consistent. We provide preliminary evidence for the effectiveness of such policies using changes in value-added tax (VAT) and household survey data for Poland. We find households increased their inflation expectations and willingness to purchase durables before the increase in VAT. Future research has to ensure income, wealth effects, or intratemporal substitution channels cannot explain these results and ideally exploit exogenous variation in VAT in a fixed nominal interest rate environment.

JEL-codes: E21 E31 E43 E62 H25 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/pandp.20181061
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