Empirical Evidence on the Aggregate Effects of Anticipated and Unanticipated U.S. Tax Policy Shocks / Karel Mertens, Morten Ravn.

Format:

Book

Author/Creator:

Mertens, Karel.

Contributor:

National Bureau of Economic Research.

Ravn, Morten.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16289.

NBER working paper series no. w16289

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

We provide empirical evidence on the dynamics effects of tax liability changes in the United States. We distinguish between surprise and anticipated tax changes using a timing-convention. We document that pre-announced but not yet implemented tax cuts give rise to contractions in output, investment and hours worked while real wages increase. In contrast, there are no significant anticipation effects on aggregate consumption. Implemented tax cuts, regardless of their timing, have expansionary and persistent effects on output, consumption, investment, hours worked and real wages. Results are shown to be very robust. We argue that tax shocks are empirically important impulses to the U.S. business cycle and that anticipation effects have been important during several business cycle episodes.

Notes:

Print version record

August 2010.