To combat the consequences of the COVID-19 pandemic, the German government unveiled an unprecedented stimulus package on 3 June which, among other policies, includes a temporary reduction of value-added tax rates between July and December 2020. The aim of this policy is to temporarily lower prices and stimulate consumption through higher inflation expectation. This column presents the first estimates of the pass-through rate for a major sector of the economy. It shows that for retail fuel, pass-through was fast, substantial, but incomplete, with pass-through rates depending on the competiveness of the relevant market.
By Felix Montag, Alina Sagimuldina, Monika Schnitzer
Source: voxeu.org
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