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Bachmann, Ruediger [Author]; Born, Benjamin [Author]; Goldfayn-Frank, Olga [Author]; Kocharkov, Georgi [Author]; Luetticke, Ralph [Author]; Weber, Michael [Author]

A Temporary VAT Cut as Unconventional Fiscal Policy

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  • Media type: Report; E-Book
  • Title: A Temporary VAT Cut as Unconventional Fiscal Policy
  • Contributor: Bachmann, Ruediger [Author]; Born, Benjamin [Author]; Goldfayn-Frank, Olga [Author]; Kocharkov, Georgi [Author]; Luetticke, Ralph [Author]; Weber, Michael [Author]
  • imprint: Munich: Center for Economic Studies and ifo Institute (CESifo), 2021
  • Language: English
  • Keywords: H31 ; unconventional fiscal policy ; E65 ; E21 ; consumption ; household data ; survey data ; value added tax ; E62 ; D12 ; E20 ; expectations
  • Origination:
  • Footnote: Diese Datenquelle enthält auch Bestandsnachweise, die nicht zu einem Volltext führen.
  • Description: We exploit the unexpected announcement of an immediate, temporary VAT cut in Germany in the second half of 2020 as a natural experiment to study the spending response to unconventional fiscal policy. We use survey and scanner data on households’ consumption expenditures and their perceived pass-through of the tax change into prices to quantify its effects. The temporary VAT cut led to a substantial relative increase in durable spending of 36% for individuals with a high perceived pass-through. Semi- and non-durable spending also increased. According to our preferred estimates, the VAT policy increased aggregate consumption spending by 34 billion Euros.
  • Access State: Open Access