The effects of tax policy on financial markets: G3 evidence
AbstractWe investigate the effects of various tax policy innovations on stock market returns. By using a vector autoregressive model that controls for the mutual causality between fiscal policy and financial market performance, we test whether financial markets serve as a transmission mechanism for tax policy innovations. Our findings indicate that indirect taxes have a larger effect on market returns than do labor taxes. Further, corporate tax innovations do not have any statistically significant effect on stock returns. We consider that this finding is a result of a firm's ability to switch between equity financing and bond financing.
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Bibliographic InfoArticle provided by Elsevier in its journal Review of Financial Economics.
Volume (Year): 18 (2009)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/inca/620170
Fiscal policy Stock returns VAR analysis;
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