Discretionary Tax Changes and the Macroeconomy: New Narrative Evidence from the United Kingdom
This paper provides new estimates of the macroeconomic effects of tax changes using a new narrative dataset for the United Kingdom. Identification is achieved by isolating ?exogenous? tax policy changes using the Romer and Romer narrative strategy. I find that a 1 percent cut in taxes increases GDP by 0.6 percent on impact and 2.5 percent over three years. The findings are remarkably similar to Romer and Romer narrative estimates for the United States, reinforcing the view that tax changes have powerful and persistent effects. ?Exogenous? tax changes are also shown to have contributed to important episodes in the UK business cycle.
Volume (Year): 103 (2013)
Issue (Month): 4 (June)
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- Karel Mertens & Morten O. Ravn, 2012.
"Empirical Evidence on the Aggregate Effects of Anticipated and Unanticipated US Tax Policy Shocks,"
American Economic Journal: Economic Policy,
American Economic Association, vol. 4(2), pages 145-181, May.
- Mertens, Karel & Ravn, Morten O, 2009. "Empirical Evidence on the Aggregate Effects of Anticipated and Unanticipated U.S. Tax Policy Shocks," CEPR Discussion Papers 7370, C.E.P.R. Discussion Papers.
- Karel Mertens & Morten O. Ravn, 2009. "Empirical evidence on the aggregate effects of anticipated and unanticipated US tax policy shocks," Working Paper Research 181, National Bank of Belgium.
- Karel Mertens & Morten Ravn, 2010. "Empirical Evidence on the Aggregate Effects of Anticipated and Unanticipated U.S. Tax Policy Shocks," NBER Working Papers 16289, National Bureau of Economic Research, Inc.
- Daniel Leigh & Andrea Pescatori & Jaime Guajardo, 2011. "Expansionary Austerity New International Evidence," IMF Working Papers 11/158, International Monetary Fund.
- Cloyne, James S, 2010. "Discretionary tax shocks in the United Kingdom 1945-2009: a narrative account and dataset," MPRA Paper 34913, University Library of Munich, Germany. Full references (including those not matched with items on IDEAS)
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