Publicação
The full, persistent, and symmetric pass-through of a temporary VAT cut
| Resumo: | We investigate the pass-through of a temporary value-added tax (VAT) cut on selected food products to consumer prices in Portugal. Exploiting a novel data set of daily online prices, we find that the VAT cut was fully transmitted to consumer prices, persisted throughout the policy duration, and prices returned to the pre-implementation trend after reversal. We discuss two potential mechanisms driving this result: the policy's salience to consumers in a high-inflation environment and the decline in producer prices when implemented. We estimate that the policy reduced the inflation rate by 0.68 percentage points on impact. |
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| Autores principais: | Bernardino, Tiago |
| Outros Autores: | Gabriel, Ricardo Duque; Quelhas, João; Silva-Pereira, Márcia |
| Assunto: | Inflation Microdata Pass-through Public policy Value-added tax Finance Economics and Econometrics |
| Ano: | 2025 |
| País: | Portugal |
| Tipo de documento: | artigo |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade Nova de Lisboa |
| Idioma: | inglês |
| Origem: | Repositório Institucional da UNL |
| Resumo: | We investigate the pass-through of a temporary value-added tax (VAT) cut on selected food products to consumer prices in Portugal. Exploiting a novel data set of daily online prices, we find that the VAT cut was fully transmitted to consumer prices, persisted throughout the policy duration, and prices returned to the pre-implementation trend after reversal. We discuss two potential mechanisms driving this result: the policy's salience to consumers in a high-inflation environment and the decline in producer prices when implemented. We estimate that the policy reduced the inflation rate by 0.68 percentage points on impact. |
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