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The dynamics between financial market development, taxation propensity, and economic growth: a study of OECD and non-OECD countries

Author

Listed:
  • Rudra P. Pradhan

    (Indian Institute of Technology)

  • Mak B. Arvin

    (Trent University)

  • Mahendhiran S. Nair

    (School of Business, Sunway University Malaysia)

  • John H. Hall

    (University of Pretoria)

Abstract

This study examined the interactions between financial market development, taxation propensity, and economic growth in OECD and non-OECD countries for the period 1961–2019. The aim was to investigate whether there is temporal causality between these variables. Using dynamic panel data modelling, we found long- and short-run inter-linkages between the variables. The study’s most robust finding is that both financial market development and taxation propensity stimulate economic growth in the long run. In contrast, the short-run results are not uniform and depend on the specific measure of financial market development used. Overall, the empirical results suggest that an integrated policy approach in developing financial markets and elevating countries’ taxation propensity will contribute to the economic growth of both the OECD and non-OECD countries. Graphic abstract

Suggested Citation

  • Rudra P. Pradhan & Mak B. Arvin & Mahendhiran S. Nair & John H. Hall, 2022. "The dynamics between financial market development, taxation propensity, and economic growth: a study of OECD and non-OECD countries," Quality & Quantity: International Journal of Methodology, Springer, vol. 56(3), pages 1503-1534, June.
    • Handle: RePEc:spr:qualqt:v:56:y:2022:i:3:d:10.1007_s11135-021-01192-w
    DOI: 10.1007/s11135-021-01192-w
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    More about this item

    Keywords

    Financial market development; Taxation propensity; Economic growth; OECD countries; Non-OECD countries;
    All these keywords.

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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