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Top-Down vs. Bottom-Up? Reconcilling the Effects of Tax and Transfer Shocks on Output

Sebastian Gechert (), Christoph Paetz () and Paloma Villanueva

No 169-2016, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: Using the bottom-up approach of Romer and Romer (2010), we construct a rich narrative dataset of net-revenue fiscal shocks for Germany by reconstructing and extending the tax shock series of Hayo and Uhl (2014) and coding a shock series for social security contributions, benefits and transfers. Based on quarterly data for 1974q1 to 2013q4 we estimate the multiplier effects of shocks to net-revenues, taxes, social security contributions and benefits in a proxy SVAR framework (Mertens and Ravn 2013) and compare them with estimates of the top-down identification inspired by Blanchard and Perotti (2002). We find multiplier effects of net-revenue components for Germany between 0 and 1 for both the top-down and bottom-up approaches. These estimates are on the lower end of the scale given in the literature and we discuss the differences.

Keywords: Narrative Record Identification; Action-Based Approach; Fiscal Multipliers; Revenue Elasticities (search for similar items in EconPapers)
JEL-codes: E62 H20 H30 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2016
New Economics Papers: this item is included in nep-mac, nep-net and nep-pbe
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Related works:
Working Paper: Top-down vs.Bottom-up? Reconciling the effects of tax and transfer shocks on output (2017) Downloads
Working Paper: Top-Down vs. Bottom-Up? Reconciling the Effects of Tax and Transfer Shocks on Output (2017) Downloads
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