State-Dependent Macroeconomic Effects of Tax Changes

43 Pages Posted: 17 May 2019

See all articles by Ruhollah Eskandari

Ruhollah Eskandari

University of Huddersfield - Huddersfield Business School; University of York

Date Written: March 12, 2019

Abstract

This paper estimates a state-dependent model where the state of the economy is measured by the unemployment rate, economic growth, and uncertainty. We find larger tax multipliers in low unemployment states and during expansions. However, tax multipliers are smaller when uncertainty is low. Results are robust to many alternative specifications. We show that this nonlinearity in the output responses is driven by lumpy investment. Moreover, given the current state of the U.S. economy and using our estimates, we project the near-term growth impact of the TCJA and predict the level of GDP to be 2.06 percent higher by 2020.

JEL Classification: E62, E22, E27, H20, H60

Suggested Citation

Eskandari, Ruhollah, State-Dependent Macroeconomic Effects of Tax Changes (March 12, 2019). Available at SSRN: https://ssrn.com/abstract=3374984 or http://dx.doi.org/10.2139/ssrn.3374984

Ruhollah Eskandari (Contact Author)

University of Huddersfield - Huddersfield Business School ( email )

Queensgate
Huddersfield, West Yorkshire HD1 3DH
United Kingdom
07859756799 (Phone)
LS15 9DW (Fax)

HOME PAGE: http://https://sites.google.com/site/reskandariecon/home

University of York ( email )

Heslington
University of York
York, YO10 5DD
United Kingdom

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