Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248944 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9399
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We exploit the unexpected announcement of an immediate, temporary VAT cut in Germany in the second half of 2020 as a natural experiment to study the spending response to unconventional fiscal policy. We use survey and scanner data on households’ consumption expenditures and their perceived pass-through of the tax change into prices to quantify its effects. The temporary VAT cut led to a substantial relative increase in durable spending of 36% for individuals with a high perceived pass-through. Semi- and non-durable spending also increased. According to our preferred estimates, the VAT policy increased aggregate consumption spending by 34 billion Euros.
Subjects: 
unconventional fiscal policy
value added tax
survey data
expectations
consumption
household data
JEL: 
D12
E20
E21
E62
E65
H31
Document Type: 
Working Paper
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