Fiscal devaluations: evidence using bilateral trade balance data

Holzner, Mario; Tkalec, Marina; Vizek, Maruška; Vukšić, Goran

doi:10.1007/s10290-018-0309-5

Cited by 11 publications

(18 citation statements)

References 10 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…A similar exercise is implemented in Holzner et al. () using bilateral data, with similar, but more robust, findings. Bernoth et al.…”

Section: Related Research and Research Hypotheses Of The Current Studymentioning

confidence: 77%

“…() and Holzner et al. (). The final model specifications are chosen according to the specific goals of our study, which analyses trade balances for single groups of products.…”

Section: Data Developments and Empirical Approachmentioning

confidence: 98%

“…Nevertheless, there remains an issue of potential policy endogeneity, that is, that tax changes are implemented due to unfavourable developments in the balance of trade. We believe that in our approach, the potential of policy endogeneity is reduced using bilateral trade balances, which could develop differently from the overall trade balance, assuming that the overall trade balance (or current account balance) is a likely policy objective variable (see also Holzner et al., ). The fact that we analyse bilateral trade balances only for segments of trade should reinforce the above argument…”

Section: Data Developments and Empirical Approachmentioning

confidence: 99%

“…In addition, and most relevant for this study, Holzner et al. () stated that the effectiveness of fiscal devaluation might depend on the composition of international trade flows. The intuition is that a VAT hike should have a stronger positive impact on the trade balance of consumer goods than on other types of goods since VAT on imports used in production can be deducted as an input tax.…”

Section: Introductionmentioning

confidence: 98%

See 3 more Smart Citations

Composition of trade flows and the effectiveness of fiscal devaluation

2018

Self Cite

View full text Add to dashboard Cite

We empirically explore whether the magnitude of the effects of fiscal devaluation, which consists of reducing the employers’ social security contribution rate and increasing the value‐added tax rate, depends on the composition of trade flows. Our sample comprises data on bilateral balances of trade between 28 European Union (EU) Member States and their main EU trade partners over the 2000–14 period. We use robust ordinary least squares regressions, controlling for the country‐pair and time fixed effects, to test whether there are differences in the sizes of relationships between these taxation forms and bilateral trade balances for different types of goods, by distinguishing between: (i) consumer, intermediate and capital goods; and (ii) labour and capital‐intensive goods. Our results show that the overall effectiveness of fiscal devaluation depends on the composition of trade flows. Value‐added tax is more strongly (positively) associated with (bilateral) balances of trade in consumer goods, compared to balances of trade in capital and intermediate goods. The employers’ contribution rate, in contrast, is more tightly (negatively) related to balances of trade in capital goods. The latter finding also holds true for trade balances of labour‐intensive goods compared to balances of capital‐intensive goods.

show abstract

“…A similar exercise is implemented in Holzner et al. () using bilateral data, with similar, but more robust, findings. Bernoth et al.…”

Section: Related Research and Research Hypotheses Of The Current Studymentioning

confidence: 77%

“…() and Holzner et al. (). The final model specifications are chosen according to the specific goals of our study, which analyses trade balances for single groups of products.…”

Section: Data Developments and Empirical Approachmentioning

confidence: 98%

Section: Data Developments and Empirical Approachmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 98%

See 2 more Smart Citations

Composition of trade flows and the effectiveness of fiscal devaluation

2018

Self Cite

View full text Add to dashboard Cite

show abstract

“…Thus, we explicitly test for the specific channel of influence of fiscal devaluation on the trade balance via the real exchange rates. The relevance of this channel has so far only been assumed, but not explored, in the empirical studies of fiscal devaluation impact on the trade balance (De Mooij & Keen, ; Holzner, Tkalec, Vizek, & Vukšić, ). Moreover, by distinguishing between short‐run and long‐run effects of taxation, we take a step further in our analysis, as compared with the existing econometric studies on taxation and real exchange rates, which are rather scarce in the first place.…”

Section: Introductionmentioning

confidence: 99%

Fiscal devaluation and real exchange rates in the Euro area: Some econometric insights

Tkalec

Vizek

Vukšić

2019

Rev International Economics

Self Cite

View full text Add to dashboard Cite

We explore whether a fiscal devaluation, that is, a reduction in employers’ social security contributions and an increase in value added tax, affects two indicators of bilateral real exchange rates in the euro area: one based on unit labor costs, and another based on consumer prices. We find that, in the short term, cuts in employers’ contributions depreciate real exchange rates based on unit labor costs, while value added tax hikes appreciate real exchange rates based on consumer prices. In the long run, a value added tax increase also appreciates the real exchange rates based on unit labor costs.

show abstract

Current and Long-Run Challenges for the Croatian Economy, in Comparison

Holzner

2021

Macroeconomic Responses to the COVID-19 Pandemic

View full text Add to dashboard Cite

Fiscal devaluations: evidence using bilateral trade balance data

Cited by 11 publications

References 10 publications

Composition of trade flows and the effectiveness of fiscal devaluation

Composition of trade flows and the effectiveness of fiscal devaluation

Fiscal devaluation and real exchange rates in the Euro area: Some econometric insights

Current and Long-Run Challenges for the Croatian Economy, in Comparison

Contact Info

Product

Resources

About