The Aggregate Effects of Anticipated and Unanticipated U.S. Tax Policy Shocks: Theory and Empirical Evidence

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dc.contributor.author MERTENS, Karel
dc.contributor.author RAVN, Morten O.
dc.date.accessioned 2008-01-23T10:48:09Z
dc.date.available 2008-01-23T10:48:09Z
dc.date.issued 2008
dc.identifier.issn 1725-6704
dc.identifier.uri http://hdl.handle.net/1814/7862
dc.description.abstract We provide empirical evidence on the effects of tax liability changes in the United States. We make a distinction between “surprise” and “anticipated” tax shocks. Surprise tax cuts give rise to a large boom in the economy. Anticipated tax liability tax cuts are instead associated with a contraction in output, investment and hours worked prior to their implementation. After their implementation, anticipated tax liability cuts lead to an economic expansion. We build a DSGE model with changes in tax rates that may be anticipated or not, estimate key parameters using a simulation estimator and show that it can account for the main features of the data. We argue that tax shocks are empirically important for U.S. business cycles and that the Reagan tax cut, which was largely anticipated, was a main factor behind the early 1980’s recession. en
dc.language.iso en en
dc.publisher European University Institute
dc.relation.ispartofseries EUI ECO en
dc.relation.ispartofseries 2008/05 en
dc.subject Fiscal policy en
dc.subject tax liabilities en
dc.subject anticipation effects en
dc.subject structural estimation en
dc.subject E20 en
dc.subject E32 en
dc.subject E62 en
dc.subject H30 en
dc.title The Aggregate Effects of Anticipated and Unanticipated U.S. Tax Policy Shocks: Theory and Empirical Evidence en
dc.type Working Paper en
dc.neeo.contributor MERTENS|Karel|aut|
dc.neeo.contributor RAVN|Morten O.|aut|
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