Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/307236 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 17412
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We use novel transaction-level card expenditure data to estimate the effect of the temporary value-added tax (VAT) cut in Germany 2020. We find that the annualized growth rate of expenditures for durables increased by 6 percentage points (pp) during the tax cut, with a particularly strong increase of up to 11 pp for consumer electronics. The expenditure growth rate for semi-durables and non-durables did not change by and large. The estimates imply a consumption multiplier of 0.2 and an elasticity of fiscal revenues to a VAT rate reduction of two thirds.
Subjects: 
consumption expenditure
transactional data
temporary VAT cut
unconventional fiscal policy
JEL: 
D12
E21
E62
E65
H31
Document Type: 
Working Paper

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