German VAT Increase Sparks 34% Surge in Consumer Spending on Durables
Unconventional fiscal policy involves raising future consumption taxes to boost spending. A study looked at how a sudden 3% increase in VAT in Germany affected consumer behavior. The announcement led to higher inflation expectations and actual inflation. As a result, Germans were 34% more willing to buy big-ticket items like appliances. This shows that unconventional fiscal policies can influence people's spending habits.