The Role of Taxes as an Automatic Stabilizer: Evidence from Turkey
AbstractThe purpose of this study was to empirically investigate the interactions between various taxes and GDP, and to detect whether taxes function as an automatic stabilizer in Turkey. Firstly, when using a time series unit-root test as proposed by Dickey-Fuller (1979), econometric findings revealed that taxes and level of GDP are not static. Secondly, upon employing cointegration designed by Johansen (1988), it was found that GDP and taxes are cointegrated. Thirdly, the Granger (1969) causality test showed that a uni-directional causality exists among taxes, and the causal relationship is between GDP to SCT, and from VAT and CIT to GDP. On the other hand, there was a bi-directional causality between GDP and PIT. Empirical findings showed that personal income tax is the most effective tax in stabilizing business cycle fluctuations. Corporate income tax is also important.
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Bibliographic InfoArticle provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).
Volume (Year): 43 (2013)
Issue (Month): 3 (December)
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Automatic Stabilizers; Fiscal Policy; Unit-Root Test; Co-Integration Analysis; Engle-Granger Causality Test; Personal Income Tax; Corporate Income Tax; Turkey;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
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