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Allan Gloe Dizioli
- 7 August 2017
- WORKING PAPER SERIES - No. 2093Why should the world care? Analysis, mechanisms and spillovers of the destination based border adjusted taxDetails
- Members of the US House of Representatives have proposed a major overhaul of the US corporate tax system, the so-called “destination-based border-adjusted cash-flow tax” (DBCFT). The literature on the economic implications and spillovers of such a DBCFT is scarce. This paper aims to provide a comprehensive analysis of the mechanics of such a tax, its macroeconomic implications as well as its global spillovers using a fully structural global multi-country model. Our results suggest that the short term macroeconomic impact of the reform would depend primarily on how permanent agents perceive the policy to be. Robustness scenarios show that the magnitude of the short term impact will also depend on the extent to which exporters are reimbursed by their domestic costs; what categories of goods are excluded from the reform; how the government uses the revenues generated by the border adjusted tax; and the pricing system used by exporters. Moreover, global spillovers will depend on how easy it is to replace imported goods by domestic production; whether US trading partners retaliate, and how financial markets in emerging economies react. If there is disequilibrium in relative prices in the short term, global economic activity spillovers could be strongly negative and world trade could decline substantially.
- JEL Code
- C68 : Mathematical and Quantitative Methods→Mathematical Methods, Programming Models, Mathematical and Simulation Modeling→Computable General Equilibrium Models
E47 : Macroeconomics and Monetary Economics→Money and Interest Rates→Forecasting and Simulation: Models and Applications
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
F44 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Business Cycles
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts
O41 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→One, Two, and Multisector Growth Models
- 5 February 2018
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 1, 2018Details
- Following the passing of legislation on the US tax reform towards the end of last year, this box summarises its main features and assesses the channels via which the reform may affect the US macroeconomy. It also discusses possible spillovers and implications from a European perspective.
- JEL Code
- H25 : Public Economics→Taxation, Subsidies, and Revenue→Business Taxes and Subsidies
H87 : Public Economics→Miscellaneous Issues→International Fiscal Issues, International Public Goods
- 26 September 2018
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 6, 2018Details
- The global trading landscape has changed rapidly in recent months. Announcements of tariffs by the US Administration and retaliation by its trading partners have raised concerns about a possible 'trade war' and, potentially, a broader reversal of globalisation. On 1 March the US Administration announced tariffs of 25% on imports of steel and 10% on imports of aluminium from a wide range of countries. The first wave of tariffs relating to technology transfers on Chinese imports took effect on 6 July, followed by the announcement of retaliation in kind by the Chinese authorities. In response to the Chinese retaliation, the US Administration threatened to impose additional tariffs. In parallel, the EU and Canada implemented retaliatory measures against the US tariffs on steel and aluminium. Finally, the US Administration initiated a new investigation of imports of cars, trucks and auto parts (to determine their effects on national security) which could result in additional tariffs. Recently, however, there have also been some signs of a reduction in trade tensions resulting from a meeting between US and EU officials as well as the new NAFTA arrangements between the United States and Mexico.
- JEL Code
- F13 : International Economics→Trade→Trade Policy, International Trade Organizations
F17 : International Economics→Trade→Trade Forecasting and Simulation
C54 : Mathematical and Quantitative Methods→Econometric Modeling→Quantitative Policy Modeling
- 27 November 2018
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 2, 2018Details
- The intensification of trade tensions this year has raised concerns about the potential adverse impact on global growth and asset prices. So far, the isolated effects of introducing tariffs on selected goods on asset prices have been adverse mainly for specific companies that rely heavily on international trade. At the same time, global financial markets have overall been fairly resilient to the announcements and implementation of tariff measures. This special feature finds that an escalation of trade tensions could trigger a global repricing in asset markets. For the euro area, asset prices would be strongly affected in the event of a full-blown global trade war, in which all countries impose tariffs on each other, while the impact of a regionally contained trade dispute escalation would be rather subdued.
- JEL Code
- E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
F13 : International Economics→Trade→Trade Policy, International Trade Organizations
F18 : International Economics→Trade→Trade and Environment
F47 : International Economics→Macroeconomic Aspects of International Trade and Finance→Forecasting and Simulation: Models and Applications