The Effect of Unconventional Fiscal Policy on Consumption – New Evidence Based on Transactional Data

Winfried Koeniger and Peter Kress ()
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Peter Kress: University of St. Gallen

No 17412, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We use novel transaction-level card expenditure data to estimate the effect of the temporary value-added tax (VAT) cut in Germany 2020. We find that the annualized growth rate of expenditures for durables increased by 6 percentage points (pp) during the tax cut, with a particularly strong increase of up to 11 pp for consumer electronics. The expenditure growth rate for semi-durables and non-durables did not change by and large. The estimates imply a consumption multiplier of 0.2 and an elasticity of fiscal revenues to a VAT rate reduction of two thirds.

Keywords: consumption expenditure; transactional data; temporary VAT cut; unconventional fiscal policy (search for similar items in EconPapers)
JEL-codes: D12 E21 E62 E65 H31 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2024-10
New Economics Papers: this item is included in nep-acc, nep-eec and nep-pbe
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Related works:
Working Paper: The Effect of Unconventional Fiscal Policy on Consumption – New Evidence Based on Transactional Data (2024)
Working Paper: The Effect of Unconventional Fiscal Policy on Consumption -New Evidence based on Transactional Data (2024)
Working Paper: The Effect of Unconventional Fiscal Policy on Consumption -- New Evidence based on Transactional Data (2024)
Working Paper: The effect of unconventional fiscal policy on consumption: New evidence based on transactional data (2024)
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