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Effects of inflation tax versus Tanzi effect on the real value of tax revenues: Evidence from Turkey

Author

Listed:
  • Işıl AKGÜL

    (Marmara Üniversitesi)

  • Mustafa Kemal BEŞER

    (Eskişehir Osmangazi Üniversitesi)

Abstract

The paper analyzes the effects of inflation on real tax revenues by relying on empirical findings. Real tax revenues are obtained by dealing with the two adverse impacts of inflation including the inflation tax increasing the revenues and the Tanzi effect reducing the overall income. Bootstrap VAR models are performed to carry out the short term relationship between inflation and real tax revenues. Bootstrap techniques are preferred to overcome the small sample data problem. Major findings, unlike the expectations with respect to Tanzi effect, show that inflation positively affects the real tax revenues. The impact of the inflation, taken as some sort of hidden tax, is visibly stronger during the period between 1987 and 2005. In addition, the performances of the analytical method and the bootstrap methods are compared, resulting in a better performance in the estimates by bootstrapping.

Suggested Citation

  • Işıl AKGÜL & Mustafa Kemal BEŞER, 2011. "Effects of inflation tax versus Tanzi effect on the real value of tax revenues: Evidence from Turkey," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 26(298), pages 45-66.
    • Handle: RePEc:iif:iifjrn:v:26:y:2011:i:298:p:45-66
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    More about this item

    Keywords

    Real tax revenue; inflation; bootstrap.;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue

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