Arbeitspapier
The Effect of Legislated Tax Changes on the Trade Balance: Empirical Evidence for the United States, Germany, and the United Kingdom
Using a narrative account of quarterly discretionary changes in tax liabilities from 1974Q4 to 2018Q2 in a VAR setting, we study whether legislative tax changes affect the trade balance in the United States, Germany, and the United Kingdom. As legislative tax changes we consider (i) all changes, (ii) personal income tax changes, (iii) business tax changes, (iv) indirect tax changes in Germany and the UK, (v) spillovers of US tax changes into Germany and the UK, and (vi) asymmetric reactions after tax hikes and cuts. Generally, we find that after a reduction in aggregated tax liabilities, imports and exports in the US and Germany react quite similarly: imports tend to rise; exports do not change much. Consequently and fostered by growing output—the net-exports-to-GDP ratio decreases. We find no clear net effect in the UK. Instead, UK imports only increase after cuts to indirect taxes. However, employing normal variations of the tax changes as a yardstick, the economic magnitude of the estimated effects on the trade variables is not particularly large. Thus, there remain doubts as to whether tax policy is an effective instrument for addressing trade imbalances.
- Language
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Englisch
- Bibliographic citation
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Series: MAGKS Joint Discussion Paper Series in Economics ; No. 03-2021
- Classification
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Wirtschaft
Fiscal Policy
Open Economy Macroeconomics
Fiscal Policies and Behavior of Economic Agents: General
Tax Law
- Subject
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Fiscal policy
tax policy
legislated tax changes
trade balance
exports
imports
Germany
United Kingdom
United States
VAR
narrative approach
- Event
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Geistige Schöpfung
- (who)
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Hayo, Bernd
Mierzwa, Sascha
- Event
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Veröffentlichung
- (who)
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Philipps-University Marburg, School of Business and Economics
- (where)
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Marburg
- (when)
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2021
- Handle
- Last update
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10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Hayo, Bernd
- Mierzwa, Sascha
- Philipps-University Marburg, School of Business and Economics
Time of origin
- 2021
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