EconPapers    
Economics at your fingertips  
 

Unconventional Fiscal Policy, Inflation Expectations, and Consumption Expenditure

Francesco D'Acunto, Daniel Hoang and Michael Weber ()

No 5793, CESifo Working Paper Series from CESifo Group Munich

Abstract: Unconventional fiscal policies incentivize households to accelerate consumption by generating future consumer price ination, and offer an alternative to unconventional monetary policy (Correia et al. (2013)). We use a natural experiment to study the causal effect of unconventional fiscal policies on consumption expenditure via the inflation-expectations channel. The German administration unexpectedly announced in November 2005 a three-percentage-point increase in value-added tax (VAT) effective in 2007. This shock increased German households’ inflation expectations during 2006, as well as actual inflation in 2007. Matched households in other European countries serve as counterfactuals in a difference-in-differences identification design. German households’ willingness to purchase durable goods increased by 34% after the shock, compared to matched foreign households. Income or wealth effects do not appear to drive these results, and we do not find evidence of intratemporal substitution from non-durable to durable consumption.

Keywords: durable consumption; zero lower bound; fiscal and monetary policy; survey data (search for similar items in EconPapers)
JEL-codes: D12 D84 D91 E21 E31 E32 E52 E65 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12) Track citations by RSS feed

Downloads: (external link)
http://www.cesifo-group.de/DocDL/cesifo1_wp5793.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_5793

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Group Munich Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().

 
Page updated 2019-04-19
Handle: RePEc:ces:ceswps:_5793