01801cas a2200253 a 4500 AALejournalIMF005184 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451870336 1018-5941 BD-DhAAL BD-DhAAL Danninger, Stephan. Inflation Smoothing and the Modest Effect of VAT in Germany / Stephan Danninger, Alina Carare. Washington, D.C. : International Monetary Fund, 2008. 1 online resource (21 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Increases in German core inflation following the 2007 VAT hike were smaller than expected, leading to speculation about delayed inflationary effects. This paper argues to the contrary that price increases in advance of the VAT hike explain the small increase upon implementation. We find that core inflation rose by 0.36 percentage point in the run up and by a further 0.40 percentage point at the time of the VAT hike. Cumulatively, the tax hike contributed to two thirds of the increase in core inflation in 2006-07 at an estimated pass-through of 73 percent. Most of the increase in 2006 was of general nature, while about one sixth can be attributed to durable goods and items with low degree of competition. Mode of access: Internet Carare, Alina. IMF Working Papers; Working Paper ; No. 2008/175 Full text available on IMF http://elibrary.imf.org/view/journals/001/2008/175/001.2008.issue-175-en.xml IMF e-Library