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The Fiscal Response to Revenue Shocks

Simon Berset, Martin Huber () and Mark Schelker ()

No 8854, CESifo Working Paper Series from CESifo

Abstract: We study the impact of fiscal revenue shocks on local fiscal policy. We focus on the very volatile revenues from the immovable property gains tax in the canton of Zurich, Switzerland, and analyze fiscal behavior following large and rare positive and negative transitory revenue shocks. We apply causal machine learning strategies and implement the post-double-selection LASSO estimator to identify the effect of revenue shocks on public finances. We find that local policymakers predominantly smooth transitory fiscal shocks.

Keywords: local public finance; fiscal policy; fiscal shocks (search for similar items in EconPapers)
JEL-codes: D70 H11 H71 H72 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-mac
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