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Title:Explaining output volatility : the case of taxation PDF Logo
Authors:Posch, Olaf
Issue Date:2009
Series/Report no.:CESifo working paper 2751
Abstract:This paper presents empirical evidence against the popular perception that macro volatility is exogenous. We obtain tax effects on macro aggregates in the stochastic neoclassical model. Taxes are shown to affect the second moment of output growth rates without affecting the first moment. Exploiting heterogeneity patterns in a panel of OECD countries, we estimate tax effects on macro volatility, explicitly modeling the unobserved variance process. We find a strong empirical link between taxes and output volatility. Accounting for non-stationarity of taxes and output volatility, we find empirical evidence of a cointegrating relationship.
Subjects:macroeconomic volatility
tax effects
continuous-time DSGE models
JEL:E32
E62
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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