The International Transmission of US Tax Shocks: A Proxy-SVAR Approach.

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Date: June 2021
From: IMF Economic Review(Vol. 69, Issue 2)
Publisher: Palgrave Macmillan Ltd. (Springer)
Document Type: Report
Length: 10,243 words
Lexile Measure: 1520L

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Abstract :

We investigate the international propagation of tax rate shocks originating in the USA using a global vector error correction model. We identify shocks to corporate and personal income tax rates by using narrative series as external instruments, following the proxy-SVAR methodology. The main results are the following: (1) In terms of fiscal multiplier, domestic effects of corporate tax shocks are stronger than those of personal income tax shock; (2) spillovers are in most cases positive and significant, albeit of small size; (3) the boost to exports in recipient economies, stimulated both by stronger US demand and, to a lesser extent, by real exchange rate depreciation, is the main transmission channel; and financial channels (through long-term interest rates) also play a role. Keywords International fiscal spillovers * Proxy SVAR * GVAR JEL Classification C22 * E62 * F42

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Gale Document Number: GALE|A666229972