The quantitative effects of tax foresight: Not all states are equal

This paper explores the effect of federal tax news on state economic activity. We estimate a factor-augmented vector autoregression (FAVAR) model, which allows us to consider the possibility that unobserved factors – such as credit and fiscal conditions – might be relevant for modeling the dynamic response of aggregate and state-level economic activity. We identify tax foresight as a shock to the implicit tax rate, measured by the yield spread...