The Effects of Tax Changes on Economic Activity: A Narrative Approach to Frequent Anticipations

Sandra García-Uribe

The Economic Journal, 2023, vol. 133, issue 650, 706-727

Abstract: This paper studies the effects of anticipations of tax changes on economic activity through the release of tax news in the media in the United States. I provide a measure of anticipations by exploiting the content of television news. This information typically flows faster than standard measures of gross domestic product, thus I propose a mixed frequency dynamic factor model to estimate both the economic activity latent factor and the effects of anticipated tax shocks on it. I find that one-month-ahead anticipations of tax cuts significantly stimulate current economic activity while those of tax increases produce the opposite effect.

Date: 2023
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Working Paper: The effects of tax changes on economic activity: a narrative approach to frequent anticipations (2018)
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