Legislative tax announcements and GDP: Evidence from the United States, Germany, and the United Kingdom

Bernd Hayo and Sascha Mierzwa

Economics Letters, 2022, vol. 216, issue C

Abstract: We study the announcement effect of legislated tax changes on GDP in the US, Germany, and the UK. Using, as the shock of interest, narratively identified information about future tax changes at the quarter of their introduction to the legislative body, we analyse the dynamic results of Local Projections. After drafting tax cuts, economic activity declines (increases) in the US (the UK), but remains unaffected in Germany. When allowing the responses to vary over the business cycle, we find evidence that US GDP drops regardless of the business cycle, whereas UK GDP rises only during non-recessionary times. German GDP rises (drops) during recessions (non-recessions).

Keywords: Fiscal policy; Tax policy; Legislated tax changes; Announcement effect; State dependence; United States; Germany; United Kingdom; Local Projections; Narrative approach (search for similar items in EconPapers)
JEL-codes: E62 E63 H20 H30 K34 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Legislative Tax Announcements and GDP: Evidence from the United States, Germany, and the United Kingdom (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:216:y:2022:i:c:s0165176522001549

DOI: 10.1016/j.econlet.2022.110548

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