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The output effects of tax changes: narrative evidence from Spain

Paula Gil, Francisco Martí, Richard Morris, Javier Pérez () and Roberto Ramos ()
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Paula Gil: Universidad Complutense
Francisco Martí: Banco de España
Richard Morris: European Central Bank

SERIEs: Journal of the Spanish Economic Association, 2019, vol. 10, issue 1, No 1, 23 pages

Abstract: Abstract This paper estimates the GDP impact of legislated tax changes in Spain using a newly constructed narrative record for the period 1986–2015. Our baseline estimates suggest that a 1% of GDP increase in exogenous taxes depresses output by around 1.3% after 1 year, this negative effect fading away at more distant horizons. We also find that the effects of changes in indirect taxes are larger and that, following a tax increase, investment reacts more than consumption. Overall, our set of estimates is consistent with negative output effects triggered by tax increases, yet the quantitative effects are subject to non-negligible uncertainty that is reflected in wide confidence bands, in line with the extant literature for other countries.

Keywords: Tax shocks; Narrative record; Fiscal policy; GDP growth (search for similar items in EconPapers)
JEL-codes: E32 E62 H20 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s13209-018-0173-5

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