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The impact of temporary tax changes on consumption: 2000–2015

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  • Hayford, Marc D.

Abstract

This paper provides estimates of the impact of fiscal policy induced temporary increases in disposable income (TIDI) on personal consumption expenditures from 2000 to 2015. The regression analysis suggests an economically large impact of TIDI on consumption. The interpretations of the results as casual depends on the plausibility of the argument that fiscal policy changes were at least partly exogenous to contemporaneous shocks to personal consumption expenditures.

Suggested Citation

  • Hayford, Marc D., 2017. "The impact of temporary tax changes on consumption: 2000–2015," The Journal of Economic Asymmetries, Elsevier, vol. 15(C), pages 32-38.
    • Handle: RePEc:eee:joecas:v:15:y:2017:i:c:p:32-38
    DOI: 10.1016/j.jeca.2016.11.001
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    References listed on IDEAS

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    1. Arthur M. Okun, 1971. "The Personal Tax Surcharge and Consumer Demand," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 2(1), pages 167-211.
    2. N. Gregory Mankiw, 2000. "The Savers-Spenders Theory of Fiscal Policy," American Economic Review, American Economic Association, vol. 90(2), pages 120-125, May.
    3. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    4. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6, National Bureau of Economic Research, Inc.
    5. Greg Kaplan & Giovanni L. Violante & Justin Weidner, 2014. "The Wealthy Hand-to-Mouth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(1 (Spring), pages 77-153.
    6. John Y. Campbell & N. Gregory Mankiw, 1989. "Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 185-246, National Bureau of Economic Research, Inc.
    7. Campbell, John Y & Mankiw, N Gregory, 1990. "Permanent Income, Current Income, and Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(3), pages 265-279, July.
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    9. Blinder, Alan S, 1981. "Temporary Income Taxes and Consumer Spending," Journal of Political Economy, University of Chicago Press, vol. 89(1), pages 26-53, February.
    10. Arthur M. Okun, 1971. "The Personal Tax Surcharge and Consumer Demand," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, pages 167-212.
    11. John B. Taylor, 2011. "An Empirical Analysis of the Revival of Fiscal Activism in the 2000s," Journal of Economic Literature, American Economic Association, vol. 49(3), pages 686-702, September.
    12. Greg Kaplan & Giovanni L. Violante & Justin Weidner, 2014. "The Wealthy Hand-to-Mouth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 45(1 (Spring), pages 77-153.
    13. Matthew D. Shapiro & Joel Slemrod, 2009. "Did the 2008 Tax Rebates Stimulate Spending?," American Economic Review, American Economic Association, vol. 99(2), pages 374-379, May.
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    15. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, March.
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    Cited by:

    1. Bhattarai, Keshab & Benjasak, Chonlakan, 2021. "Growth and redistribution impacts of income taxes in the Thai Economy: A dynamic CGE analysis," The Journal of Economic Asymmetries, Elsevier, vol. 23(C).

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    More about this item

    Keywords

    E6; E62; Fiscal stimulus; Payroll Tax Holiday; Consumption spending;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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