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The Role of Taxes as an Automatic Stabilizer: Evidence from Turkey

Author

Listed:
  • Hüseyin SEN

    (Yildirim Beyazit University, Faculty of Political Sciences, Department of Public Finance, Ankara, Turkey)

  • Ayse KAYA

    (Izmir Kâtip Çelebi University, Faculty of Economics and Administrative Sciences, Department of Public Finance, Izmir, Turkey)

Abstract

The 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.

Suggested Citation

  • Hüseyin SEN & Ayse KAYA, 2013. "The Role of Taxes as an Automatic Stabilizer: Evidence from Turkey," Economic Analysis and Policy, Elsevier, vol. 43(3), pages 303-313, December.
    • Handle: RePEc:eee:ecanpo:v:43:y:2013:i:3:p:303-313
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    Cited by:

    1. Chebet, Camilla & Kiemo, Samuel, 2017. "Price channel versus quantity channel: The relationship between government domestic borrowing from commercial banks and private sector credit in Kenya," KBA Centre for Research on Financial Markets and Policy Working Paper Series 19, Kenya Bankers Association (KBA).
    2. Şen, Hüseyin & Kaya, Ayşe, 2021. "Output-volatility reducing effects of automatic stabilizers: Policy implications for EMU member states," Journal of Policy Modeling, Elsevier, vol. 43(6), pages 1388-1414.
    3. Shodiya Olayinka Abideen & Sanyaolu Wasiu Abiodun & Ojenike Joseph Olushola & Ogunmefun Gbadebo Tirimisiyu, 2019. "Shareholder Wealth Maximization and Investment Decisions of Nigerian Food and Beverage Companies," Acta Universitatis Sapientiae, Economics and Business, Sciendo, vol. 7(1), pages 47-63, December.
    4. AILINCA, Alina Georgeta, 2018. "Identification Criteria Of Automatic Stabilizers And Their Typological Classes," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 6(1), pages 39-47, October.

    More about this item

    Keywords

    Automatic Stabilizers; Fiscal Policy; Unit-Root Test; Co-Integration Analysis; Engle-Granger Causality Test; Personal Income Tax; Corporate Income Tax; Turkey;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • 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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