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Robustness Report on "Discretionary Tax Changes and the Macroeconomy: New Narrative Evidence from the United Kingdom", by James Cloyne (2013)

Author

Listed:
  • Kopecky, Joseph
  • Campbell, Douglas
  • Brodeur, Abel
  • Johannesson, Magnus
  • Lusher, Lester
  • Tsoy, Nikita

Abstract

Cloyne (2013) constructs a novel dataset documenting fiscal tax shocks in the United Kingdom using the narrative approach developed by Romer and Romer (2010), and estimates the impact of tax changes on GDP. He finds that a tax cut of one percent of GDP causes a 0.6 percent increase in output in the initial quarter of the policy, rising to a peak of 2.5 percent over three years. We first reproduce all of the VAR tables and figures in the original paper, and then test for robustness through a number of changes to the baseline regression model, particularly: changes in lag structure, changes in the control set, alternative estimation procedures, and excluding influential observations. In 60% of robustness the impact effect is significant at the 95% level, with a mean estimated coefficient of 0.63, while in 70% of robustness tests the peak response remains significant at the 95% level, with a mean peak response of 2.27.

Suggested Citation

  • Kopecky, Joseph & Campbell, Douglas & Brodeur, Abel & Johannesson, Magnus & Lusher, Lester & Tsoy, Nikita, 2024. "Robustness Report on "Discretionary Tax Changes and the Macroeconomy: New Narrative Evidence from the United Kingdom", by James Cloyne (2013)," I4R Discussion Paper Series 132, The Institute for Replication (I4R).
    • Handle: RePEc:zbw:i4rdps:132
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    References listed on IDEAS

    as
    1. Mikkel Plagborg‐Møller & Christian K. Wolf, 2021. "Local Projections and VARs Estimate the Same Impulse Responses," Econometrica, Econometric Society, vol. 89(2), pages 955-980, March.
    2. James Cloyne, 2013. "Discretionary Tax Changes and the Macroeconomy: New Narrative Evidence from the United Kingdom," American Economic Review, American Economic Association, vol. 103(4), pages 1507-1528, June.
    3. Òscar Jordà, 2005. "Estimation and Inference of Impulse Responses by Local Projections," American Economic Review, American Economic Association, vol. 95(1), pages 161-182, March.
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    Keywords

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    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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