Comparing the Effects of Discretionary Tax Changes between the US and the UK

Hussain, Syed; Liu, Lin

doi:10.2139/ssrn.2670488

Cited by 8 publications

(11 citation statements)

References 11 publications

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“…The effect on GDP, not shown here, is even negative on impact, before turning insignificant after one quarter. While this outcome seems counterintuitive, it is in line with Hussain and Liu's (2018) report of a negative effect of personal income tax cuts on GDP. Hence, the net-export-to-GDP ratio follows the path of real exports and decreases, although hardly significantly, by about 0.5 pp (or 0.24 standard deviations).…”

Section: Figure 4: United States-personal Income Tax Shocksupporting

confidence: 85%

“…As a result, neither imports or exports have a significant reaction. We do, however, measure an increase in real GDP of about 2% after two years, which is similar to that reported by Hussain and Liu (2018). As a result, the net-export-to-GDP ratio drops by almost 2 pp (about Notes: See Figure 1.…”

Section: Figure 4: United States-personal Income Tax Shocksupporting

confidence: 82%

“…For the sake of estimation efficiency, we stick to one lag for both the United States and the United Kingdom, which is supported by FPE, BIC, and AIC. This specification removes autocorrelation up to order 5 and also corresponds to the number of endogenous lags used in Mertens and Ravn (2012) and Hussain and Liu (2018).…”

Section: Methodsmentioning

confidence: 99%

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The Effect of Legislated Tax Changes on the Trade Balance: Empirical Evidence for the United States, Germany, and the United Kingdom

Hayo

Mierzwa

2021

SSRN Journal

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Using a narrative account of quarterly discretionary changes in tax liabilities from 1974Q4 to 2018Q2 in a VAR setting, we study whether legislative tax changes affect the trade balance in the United States, Germany, and the United Kingdom. As legislative tax changes we consider (i) all changes, (ii) personal income tax changes, (iii) business tax changes, (iv) indirect tax changes in Germany and the UK, (v) spillovers of US tax changes into Germany and the UK, and (vi) asymmetric reactions after tax hikes and cuts. Generally, we find that after a reduction in aggregated tax liabilities, imports and exports in the US and Germany react quite similarly: imports tend to rise; exports do not change much. Consequently-and fostered by growing output-the net-exports-to-GDP ratio decreases. We find no clear net effect in the UK. Instead, UK imports only increase after cuts to indirect taxes. However, employing normal variations of the tax changes as a yardstick, the economic magnitude of the estimated effects on the trade variables is not particularly large.Thus, there remain doubts as to whether tax policy is an effective instrument for addressing trade imbalances.

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Section: Figure 4: United States-personal Income Tax Shocksupporting

confidence: 85%

Section: Figure 4: United States-personal Income Tax Shocksupporting

confidence: 82%

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The Effect of Legislated Tax Changes on the Trade Balance: Empirical Evidence for the United States, Germany, and the United Kingdom

Hayo

Mierzwa

2021

SSRN Journal

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“…These methods are essentially looking for historical natural experiments. A number of papers have applied or refined this method including Barro and Redlick (2011), Cloyne (2013), Mertens and Ravn (2013), Guajardo, Leigh, and Pescatori (2014), Hayo and Uhl (2014), Cloyne and Surico (2017), Gunter, Riera-Crichton, Végh, and Vuletin (2018), Nguyen, Onnis, and Rossi (2017), Hussain and Lin (2018), Cloyne, Dimsdale, and Postel-Vinay (2018).…”

Section: Introductionmentioning

confidence: 99%

Decomposing the Fiscal Multiplier

Cloyne¹,

Jordà²,

Taylor³

2020

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Unusual circumstances often coincide with unusual fiscal policy actions. Much attention has been paid to estimates of how fiscal policy affects the macroeconomy, but these are typically average treatment effects. In practice, the fiscal "multiplier" at any point in time depends on the monetary policy response. Using the IMF fiscal consolidations dataset for identification and a new decomposition-based approach, we show how to evaluate these monetary-fiscal effects. In the data, the fiscal multiplier varies considerably with monetary policy: it can be zero, or as large as 2 depending on the monetary offset. We show how to decompose the typical macro impulse response function into (1) the direct effect of the intervention on the outcome; (2) the indirect effect due to changes in how other covariates affect the outcome when there is an intervention; and (3) a composition effect due to differences in covariates between treated and control subpopulations. This Blinder-Oaxaca-type decomposition provides convenient way to evaluate the effects of policy, state-dependence, and balance conditions for identification.

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“…7 See karelmertens.com/research. For an alternative and more comprehensive methodological overview, see alsoRamey (2016).8 The same approach has been used to study the effects of tax policy changes in the United Kingdom (Cloyne (2013), Cloyne and Surico (2017),Nguyen et al (2017),Hussain and Liu (2018)), Germany(Hayo and Uhl (2014)), Canada(Lopes (2016),Hussain and Liu (2017)), Spain(Gil et al (2017)), or multiple countries(Leigh et al (2014),Riera-Crichton et al (2012)).…”

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confidence: 99%

The Near Term Growth Impact of the Tax Cuts and Jobs Act

Mertens

2018

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This note uses existing empirical estimates of the macroeconomic effects of tax changes to project the near term impact of the Tax Cuts and Jobs Act on US GDP growth. Applying recent reduced form estimates of tax multipliers with the projected revenue impact of the Act yields a level of GDP that is predicted to be 1.3% higher by 2020, with most of the growth front-loaded in 2018. Accounting for the composition of the Act in terms of its individual and corporate provisions leads to a similar GDP increase by 2020, but with stronger growth in 2018 and a partial reversal in the following years. Accounting for the impact of TCJA on marginal individual tax rates raises the projected growth impact considerably, while accounting for the distribution of the tax changes across income groups suggests a more delayed positive impact on GDP. These projections are conditional on meanreverting dynamics of future taxes that are estimated from postwar US data.

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Comparing the Effects of Discretionary Tax Changes between the US and the UK

Cited by 8 publications

References 11 publications

The Effect of Legislated Tax Changes on the Trade Balance: Empirical Evidence for the United States, Germany, and the United Kingdom

The Effect of Legislated Tax Changes on the Trade Balance: Empirical Evidence for the United States, Germany, and the United Kingdom

Decomposing the Fiscal Multiplier

The Near Term Growth Impact of the Tax Cuts and Jobs Act

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