Macroeconomic effects of discretionary tax changes in Canada: Evidence from a new narrative measure of tax shocks

Hussain, Syed M and Liu, Lin ORCID: 0000-0002-8222-7625 (2024) Macroeconomic effects of discretionary tax changes in Canada: Evidence from a new narrative measure of tax shocks. Canadian Journal of Economics/Revue canadienne d'économique, 57 (1). pp. 78-107.

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Official URL: http://dx.doi.org/10.1111/caje.12689

Abstract

<jats:title>Abstract</jats:title><jats:p>In this paper we study the macroeconomic effects of changes in federal taxes for the Canadian economy for the time period 1961–2014. We document all legislated tax changes and the motivations behind them. We then employ the narrative methodology of Romer and Romer (2010) and Cloyne (2013) to identify exogenous changes in federal taxes. Our main empirical result shows that a tax cut of 1% of GDP leads to an increase in GDP of 2.1% on impact and a peak increase of 2.68% after three quarters of the initial shock. Disaggregated analysis shows that the response of output is driven by consumption and investment. We also find changes in personal income and other (sales and production) taxes to have strong effects on output.</jats:p>

Item Type:	Article
Divisions:	Faculty of Humanities and Social Sciences > School of Management
Depositing User:	Symplectic Admin
Date Deposited:	16 Nov 2023 08:15
Last Modified:	26 Feb 2024 17:09
DOI:	10.1111/caje.12689
Related URLs:	Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3176829