NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Are Tax Cuts Really Expansionary?

N. Gregory Mankiw, Lawrence H. Summers

NBER Working Paper No. 1443 (Also Reprint No. r0810)
Issued in 1987
NBER Program(s):   EFG   PE

In this paper, we re-examine the standard analysis of the short-run effect of a personal tax cut. If consumer spending generates more money demand than other components of GNP, then tax cuts may, by increasing the demand for money, depress aggregate demand. We examine a variety of evidence and conclude that the necessary condition for contractionary tax cuts is probably satisfied for the U.S. economy.

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Document Object Identifier (DOI): 10.3386/w1443

Published: Mankiw, N. Gregory Mankiw and Lawrence H. Summers. "Money Demand and the Effects of Fiscal Policies," Journal of Money, Credit and Banking, Vol. 18(November 1986): 415-429.

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