The Effect of Unconventional Fiscal Policy on Consumption Expenditure

@inproceedings{DAcunto2016TheEO,
  title={The Effect of Unconventional Fiscal Policy on Consumption Expenditure},
  author={Francesco D’Acunto and Daniel Hoang and Michael Weber},
  year={2016}
}
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… CONTINUE READING

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