Arbeitspapier
Revisiting the Narrative Approach of Estimating Tax Multipliers
A number of recent studies regress a narratively identified measure of a macroeconomic shock directly on an outcome variable. In this note, we argue that this approach can be viewed as the reduced-form regression of an instrumental variable approach in which the narrative time series is used as an instrument for an endogenous series of interest. We construct confidence bands for the case in which the narrative shock and the endogenous variable of interest are only weakly correlated. We apply the method to four narrative tax measures recently constructed by Romer and Romer (2010), Cloyne (2013), and Mertens and Ravn (2012). These variables turn out to be weak instruments for cyclically adjusted tax revenues. Compared to the single-equation estimation, we find that using any of the considered narrative tax measures as an instrument for cyclically adjusted tax revenues yields estimates of multipliers that are statistically indistinguishable from zero after correcting the confidence bands for weak instruments.
- Language
-
Englisch
- Bibliographic citation
-
Series: CESifo Working Paper ; No. 5040
- Classification
-
Wirtschaft
Fiscal Policy
Fiscal Policies and Behavior of Economic Agents: General
Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: Other
- Subject
-
narrative approach
fiscal stabilization
multiplier
weak instruments
- Event
-
Geistige Schöpfung
- (who)
-
Hebous, Shafik
Zimmermann, Tom
- Event
-
Veröffentlichung
- (who)
-
Center for Economic Studies and ifo Institute (CESifo)
- (where)
-
Munich
- (when)
-
2014
- Handle
- Last update
-
10.03.2025, 11:41 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
- Hebous, Shafik
- Zimmermann, Tom
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2014
Other Objects (12)
Revisiting the narrative approach of estimating tax multipliers
Revisiting the narrative approach of estimating tax multipliers
Revisiting the Narrative Approach of Estimating Fiscal Multipliers
A Bayesian approach to estimating tax and spending multipliers
Estimating fiscal multipliers in selected Asian economies
Estimating Fiscal multipliers in the Eurozone A Nonlinear Panel Data Approach
Revisiting the Capital Tax Ambiguity Result
Deficits, public debt dynamics, and tax and spending multipliers
Planned fiscal consolidation and under-estimated multipliers: Revisiting the evidence and relevance for the euro area
Multipliers of Change
Revisiting the Progressive Consumption Tax : a Business Cycle Perspective
Revisiting the progressive consumption tax: A business cycle perspective
Revisiting the narrative approach of estimating tax multipliers
Revisiting the narrative approach of estimating tax multipliers
Revisiting the Narrative Approach of Estimating Fiscal Multipliers
A Bayesian approach to estimating tax and spending multipliers
Estimating fiscal multipliers in selected Asian economies
Estimating Fiscal multipliers in the Eurozone A Nonlinear Panel Data Approach
Revisiting the Capital Tax Ambiguity Result
Deficits, public debt dynamics, and tax and spending multipliers
Planned fiscal consolidation and under-estimated multipliers: Revisiting the evidence and relevance for the euro area
Multipliers of Change
Revisiting the Progressive Consumption Tax : a Business Cycle Perspective
Revisiting the progressive consumption tax: A business cycle perspective
Revisiting the narrative approach of estimating tax multipliers
Revisiting the narrative approach of estimating tax multipliers
Revisiting the Narrative Approach of Estimating Fiscal Multipliers
A Bayesian approach to estimating tax and spending multipliers
Estimating fiscal multipliers in selected Asian economies
Estimating Fiscal multipliers in the Eurozone A Nonlinear Panel Data Approach
Revisiting the Capital Tax Ambiguity Result
Deficits, public debt dynamics, and tax and spending multipliers
Planned fiscal consolidation and under-estimated multipliers: Revisiting the evidence and relevance for the euro area
Multipliers of Change
Revisiting the Progressive Consumption Tax : a Business Cycle Perspective