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General Sales Tax and Economic Growth in Small Open Developing Countries - Evidence from Jordan

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  • Anwar Rashed Al Quraan

Abstract

This paper examines the long and short-term empirical relationship between general sales tax(1) and economic growth between 1980-2018 in Jordan. Standardized tests were utilized, specifically Aug-mented Dickey-Fuller and Phillip-Peron methods. From the results, it can be ascertained that the variables are integrated at different degrees and are less than two. As such, we utilized the “Auto-Regressive Distributed Lag (ARDL)†approach for co-integration to determine the relationship between variables over both short and long term periods. Its results indicated one co-integrated relation between sales tax and economic growth. Moreover, a significantly positive effect was observed on economic growth in the short run, but in contrast, long term outcomes showed a negative relationship between the variables. As such, this study concludes that an amendment is needed in the tax system to make it more beneficial for Jordanian economic growth.

Suggested Citation

  • Anwar Rashed Al Quraan, 2020. "General Sales Tax and Economic Growth in Small Open Developing Countries - Evidence from Jordan," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 16(3), pages 7-15.
    • Handle: RePEc:mje:mjejnl:v:16:y:2020:i:3:7-15
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