The Effect of Unconventional Fiscal Policy on Consumption Expenditure
By Francesco D’acunto, Daniel Hoang, Michael Weber. Social Science Research Network, 2016
118 citations recorded by the source corpus.
Unconventional fiscal policy uses announcements of future increases in consumption taxes to generate inflation expectations and accelerate consumption expenditure. It is budget neutral and time consistent. We exploit a unique natural experiment for an empirical test of the effectiveness of unconventional fiscal policy. To comply with European Union law, the German government announced in November 2005 an unexpected 3-percentage-point increase in value-added tax (VAT), effective in 2007. The shock increased households' inflation expectations during 2006 and actual inflation in 2007. Germans' willingness to purchase durables increased by 34% after the shock, compared to before and to matched households in other European countries not exposed to the VAT shock. Income, wealth effects, or intratemporal substitution cannot explain these results.
Subfields: Accounting, Economics and Econometrics, Renewable Energy, Sustainability and the Environment
View Paper: https://www.semanticscholar.org/paper/09025d1f769ef7b813db6872343b10b12ec37202
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Citations in the corpus
- Personal Experiences and Expectations about Aggregate Outcomes (2019, unknown): “Table (25)Stephens Jr (2004) and Dickerson and Green (2012) also find that expectations of unemployment are predictive of future employment outcomes, and Buchheim and Link (2017) find that firms’ expectations are informative of their future business condition.”
- How Do Expectations about the Macroeconomy Affect Personal Expectations and Behavior? (2020, background): “, 2017a,b) or the effect of inflation expectations on consumption behavior (Bachmann et al., 2015; D’Acunto et al., 2018).”
- Exposure to Daily Price Changes and Inflation Expectations (2019, unknown): “Previous research documented greater stock market participation for more educated and higher-income individuals (D’Acunto, Prokopczuk, and Weber (2019)) who also tend to have more accurate inflation expectations (D’Acunto et al. (2016)).”
- The Cost of the Covid-19 Crisis: Lockdowns, Macroeconomic Expectations, and Consumer Spending (2020, unknown): “Hence, households mainly curb their discretionary spending and adjust their non-discretionary spending by less, which is consistent with D’Acunto et al. (2019). Furthermore, we observe that even for those that have positive debt payments, the size of the payment declines by approximately 15 log perc”
- Monetary Policy Through Production Networks: Evidence from the Stock Market (2017, unknown): “(2016), Herskovic (2017), Ramirez (2017) and Gofman, Segal, and Wu (2017) study the asset-pricing implications.”