When are tax multipliers large?
- Author(s)
- Alexander Ziegenbein
- Abstract
I show that the US tax multiplier depends on the direction of the tax change. The tax multiplier is significantly larger (in absolute value) for tax hikes than for tax cuts – regardless of whether I identify tax shocks via (i) the narrative approach or (ii) sign restrictions. The tax hike multiplier is strongly pro-cyclical, i.e., substantially larger in expansions. Variation in the tax cut multiplier over the business cycle is milder and statistically insignificant. A simple business cycle model with downward nominal wage rigidities can explain these results.
- Organisation(s)
- Department of Economics
- Journal
- Journal of Economic Dynamics and Control
- Volume
- 158
- ISSN
- 0165-1889
- DOI
- https://doi.org/10.1016/j.jedc.2023.104785
- Publication date
- 11-2023
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502018 Macroeconomics
- Keywords
- ASJC Scopus subject areas
- Control and Optimization, Applied Mathematics, Economics and Econometrics
- Portal url
- https://ucrisportal.univie.ac.at/en/publications/when-are-tax-multipliers-large(ad01cd8c-c468-42ce-9b16-2bbe0d791e02).html