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Constructing exogenous output elasticity of tax revenue for the Albanian fiscal sector

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  • Papavangjeli, Meri

Abstract

This article presents an estimation of the exogenous elasticity of fiscal revenues in Albania with respect to economic output, a critical parameter of macroeconometric models used for effective macroeconomic policy decision-making. By utilizing the OECD disaggregated approach with the latest available data from 1998 to 2018, which consists in calculating the output elasticities for the main tax components such as Value Added Tax, direct taxes, Excise Taxes, Customs duties, and Social security taxes, the calculated overall output elasticity of tax revenue is found to be 1.3, signifying that on average a 1% increase in economic output generates a 1.3% increase in tax revenue, ceteris paribus. The respective regressions are carried out using heteroskedasticity and autocorrelation corrected standard errors, which account for the potential presence of heteroskedasticity and autocorrelation in the data.

Suggested Citation

  • Papavangjeli, Meri, 2018. "Constructing exogenous output elasticity of tax revenue for the Albanian fiscal sector," MPRA Paper 116918, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:116918
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    File URL: https://mpra.ub.uni-muenchen.de/116918/1/MPRA_paper_116918.pdf
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    References listed on IDEAS

    as
    1. Mertens, Karel & Ravn, Morten O., 2014. "A reconciliation of SVAR and narrative estimates of tax multipliers," Journal of Monetary Economics, Elsevier, vol. 68(S), pages 1-19.
    2. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1329-1368.
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    More about this item

    Keywords

    fiscal sector; output elasticity; tax revenue;
    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
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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