In this reply to a comment by Jentsch and Lunsford, we show that, when focusing on the relevant impulse responses, the evidence for economic and statistically significant macroeconomic effects of tax changes in Mertens and Ravn (2013) remains present for a range of asymptotically valid inference...

The study assumes that conventional GDP is not a good indicator for wealth. Therefore an alternative indicator the National Welfare Index (NWI) is constructed. It includes next to consumption measures for environmental pollution and inequality. The NWI is compared to GDP development. It turns...