Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/30433 
Authors: 
Year of Publication: 
2009
Series/Report no.: 
CESifo Working Paper No. 2751
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
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
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