Dining and Wining During the Pandemic? A Quasi-Experiment on Tax Cuts and Consumer Spending in Lithuania
IMF Working Papers, September 8, 2023
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Bibliographic details
- Authors: Serhan Cevik
- Published: September 8, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400252556.001
Research question and methodology
- Research question: Could temporary tax cuts stimulate consumer spending?
- Quasi-experimental variation: Sector-specific measures to the COVID-19 pandemic that created variation in consumption patterns.
- Data: A novel dataset of daily debit and credit card transactions.
- Policy intervention studied: Lithuania’s decision to cut the standard value-added tax (VAT) rate from 21 percent to 9 percent on restaurants and catering services during the pandemic.
- Empirical approach: Difference-in-differences regression framework.
Key findings
- Robust evidence that the VAT reduction has had no statistically significant impact on consumer spending on restaurants and catering services.
- Other policy interventions, such as mobility restrictions and vaccination, have more pronounced effects on consumer spending.
- The VAT cut studied: from 21 percent to 9 percent.
Policy implications and interpretation
- Sector-specific VAT reductions may not deliver the expected stimulative effect on consumer spending when mobility is highly constrained by a pandemic.
- Effective design of fiscal policy interventions to counter pandemic impacts should account for non-tax determinants of spending, notably mobility restrictions and public-health measures such as vaccination.
Publication and metadata
- Author: Serhan Cevik
- Publication date: September 8, 2023
- Series: IMF Working Papers
- Working Paper: No. 2023/188
- Pages: 15
- Volume: 2023
- Issue: 188
- DOI: https://doi.org/10.5089/9798400252556.001
- Stock No: WPIEA2023188
- ISBN: 9798400252556
- ISSN: 1018-5941
Source: IMF Working Paper "Dining and Wining During the Pandemic? A Quasi-Experiment on Tax Cuts and Consumer Spending in Lithuania" by Serhan Cevik, September 8, 2023.
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