Panel B of the same table displays the cumulative net tax response to a spending
shock; it is typically positive in S1, and (except in Australia) negative in S2.
Net taxes, however, are very sensitive to the behavior of GDP, and as we will see
below, GDP typically rises in S1 and falls in S2 following a government spending shock:
this could explain the different behavior of net taxes in the two subperiods. To partial out
the automatic effect of GDP and prices on net taxes, I compute the response of cyclically
adjusted net taxes, displayed in panel C of Table 6. Given the very different GDP
response in the two subsamples (see panel E below), the response of cyclically adjusted
net taxes is smaller in S1 and algebraically larger in S2 than the response of unadjusted
taxes in Panel B; but at 3 years it is still largely positive in S1 and negative in S2 in all
countries except in Australia. This pattern will be important in interpreting the different
responses of GDP in the two subsamples.