Unconventional Fiscal Policy

6 Pages Posted: 18 Jan 2018

See all articles by Francesco D'Acunto

Francesco D'Acunto

Boston College

Daniel Hoang

Karlsruhe Institute of Technology (KIT)

Michael Weber

University of Chicago - Finance

Multiple version iconThere are 4 versions of this paper

Date Written: January 17, 2018

Abstract

Unconventional fiscal policy uses announcements of future increases in consumption taxes to generate inflation expectations and accelerate consumption expenditure. It is budget neutral and time consistent. We provide preliminary evidence for the effectiveness of such policies using changes in value-added tax (VAT) and household survey data for Poland. We find households increased their inflation expectations and willingness to purchase durables before the increase in VAT. Future research has to ensure income, wealth effects, or intratemporal substitution channels cannot explain these results and ideally exploit exogenous variation in VAT in a fixed nominal interest rate environment.

Suggested Citation

D'Acunto, Francesco and Hoang, Daniel and Weber, Michael, Unconventional Fiscal Policy (January 17, 2018). Chicago Booth Research Paper No. 18-02; Fama-Miller Working Paper . Available at SSRN: https://ssrn.com/abstract=3104115 or http://dx.doi.org/10.2139/ssrn.3104115

Francesco D'Acunto

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Daniel Hoang

Karlsruhe Institute of Technology (KIT) ( email )

Karlsruhe
Germany

Michael Weber (Contact Author)

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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