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Revisiting the Narrative Approach of Estimating Tax Multipliers

Shafik Hebous () and Tom Zimmermann

Scandinavian Journal of Economics, 2018, vol. 120, issue 2, 428-439

Abstract: We analyze whether popular measures of narrative tax shocks can be treated as relevant instruments for observable endogenous tax series of interest. We find that narrative tax measures are only weakly correlated with cyclically adjusted tax revenues for the US and the UK. Using weak‐instrument robust inference, narrative tax measures often yield insignificant estimates of tax multipliers. We conclude that the literature currently understates the uncertainty associated with estimating the tax multiplier using the narrative approach.

Date: 2018
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Working Paper: Revisiting the narrative approach of estimating tax multipliers (2015) Downloads
Working Paper: Revisiting the Narrative Approach of Estimating Tax Multipliers (2014) Downloads
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