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Rethinking The Effects Of Fiscal Policy On Macroeconomic Aggregates: A Disaggregated Svar Analysis

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  • Umut UNAL

    (Department of Economics, Turgut Ozal University, Ankara, Turkey.)

Abstract

This paper characterizes the dynamic effects of net tax and government spending shocks on several macroeconomic aggregates in four OECD countries using a structural VAR approach. For the first time in the literature, I propose a structural decomposition of total net taxes into four components: corporate income taxes, income taxes, indirect taxes and social insurance taxes. The paper provides estimates of the responses of macroeconomic aggregates to innovations in these net tax components. Decompositions of total net tax innovations show that net tax components have different impacts on economic variables depending upon the strength of wealth, substitution, and income effects reflecting the structure of the economies.

Suggested Citation

  • Umut UNAL, 2015. "Rethinking The Effects Of Fiscal Policy On Macroeconomic Aggregates: A Disaggregated Svar Analysis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 120-135, September.
    • Handle: RePEc:rjr:romjef:v::y:2015:i:3:p:120-135
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    3. Artem Vdovychenko, 2018. "How Does Fiscal Policy Affect GDP and Inflation in Ukraine?," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 244, pages 25-43.
    4. Lara Wemans & Manuel Coutinho Pereira, 2013. "Output effects of fiscal policy in Portugal: a structural VAR approach," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.

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    More about this item

    Keywords

    Fiscal shocks; Tax policy; decomposition; income effect; wealth effect;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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