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The effects of countercyclical fiscal policy: Firm-level evidence from temporary consumption tax cuts in Turkey

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  • Misch, Florian
  • Seymen, Atılım

Abstract

The paper investigates the effects of temporary consumption tax cuts using firm-level data. As part of its countercyclical measures implemented during the recent global economic crisis, Turkey temporarily lowered consumption taxes on selected durables. Using data on the change of sales of firms that benefited from this measure and of those that did not over different periods, we perform a difference-in-difference analysis where we also control for various unobservable effects including sector-specific shocks to address potential endogeneity. We find positive and robust effects of consumption tax cuts on the change of firm sales which is consistent with theoretical predictions.

Suggested Citation

  • Misch, Florian & Seymen, Atılım, 2012. "The effects of countercyclical fiscal policy: Firm-level evidence from temporary consumption tax cuts in Turkey," ZEW Discussion Papers 12-082, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:12082
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    Cited by:

    1. Vesal, Mohammad, 2017. "Stimulus Effect of a Value-added Tax Cut: Evidence from the UK Tax Returns Data," MPRA Paper 101016, University Library of Munich, Germany.
    2. Lo Turco, Alessia & Maggioni, Daniela, 2014. "The micro evolution of trade and turnover in Turkey under the global crisis," Economic Systems, Elsevier, vol. 38(3), pages 397-414.

    More about this item

    Keywords

    countercyclical fiscal policy; consumption tax cuts; firm-level data;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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

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