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RETHINKING THE EFFECTS OF FISCAL POLICY ON MACROECONOMIC AGGREGATES: A DISAGGREGATED SVAR ANALYSIS

Umut Unal ()

Journal for Economic Forecasting, 2015, issue 3, 120-135

Abstract: This paper characterizes the dynamic effects of net tax and government spending shocks on several macroeconomic aggregates in four OECD countries using a structural VAR approach. For the first time in the literature, I propose a structural decomposition of total net taxes into four components: corporate income taxes, income taxes, indirect taxes and social insurance taxes. The paper provides estimates of the responses of macroeconomic aggregates to innovations in these net tax components. Decompositions of total net tax innovations show that net tax components have different impacts on economic variables depending upon the strength of wealth, substitution, and income effects reflecting the structure of the economies.

Keywords: Fiscal shocks; Tax policy; decomposition; income effect, wealth effect (search for similar items in EconPapers)
JEL-codes: E62 H20 H30 (search for similar items in EconPapers)
Date: 2015
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Related works:
Working Paper: Rethinking the Effects of Fiscal Policy on Macroeconomic Aggregates: A Disaggregated SVAR Analysis (2011) Downloads
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