Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/328247 
Year of Publication: 
2025
Series/Report no.: 
Deutsche Bundesbank Discussion Paper No. 24/2025
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
We exploit Germany's temporary three-percentage-point VAT cut in the second half of 2020 to study the spending response to unconventional fiscal policy. We use survey and scanner data on household consumption expenditures and their perceived pass-through of the tax change into prices, and a RANK model to quantify the effects of this VAT policy. The survey and scanner data show that the temporary VAT reduction led to a relative increase in durable and, to a lesser extent, semidurable spending for individuals with high perceived pass-through. According to the RANK model, the VAT policy increased total aggregate consumption spending by 4.4 percent on impact.
Subjects: 
unconventional fiscal policy
value added tax
survey data
expectations
consumption
durables
RANK model
JEL: 
D12
E20
E21
E62
E65
R31
ISBN: 
978-3-98848-045-3
Document Type: 
Working Paper

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