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AVAR Analysis of the Impacts of Company Tax Rates on Foreign Direct Investment and other Macro-economic Variables in Australia

Author

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  • Albert Wijeweera
  • Stuart Mounter

Abstract

Taxation policy has been recognized as a main determinant of foreign direct investment (FDI). However, the effect of taxation policy on other key macro-economic variables of interest has received little attention in the literature. This paper seeks to establish the long-run effects of a change in the Australian company tax rate on inbound FDI and other Australian macro-economic variables using vector autoregression (VAR) analysis to account for the interrelatedness of the variables under consideration. Results indicate that FDI, real gross domestic product (GDP) and trade with the rest of the world are all responsive to a change in the company tax rate.

Suggested Citation

  • Albert Wijeweera & Stuart Mounter, 2007. "AVAR Analysis of the Impacts of Company Tax Rates on Foreign Direct Investment and other Macro-economic Variables in Australia," Global Economic Review, Taylor & Francis Journals, vol. 36(2), pages 137-145.
  • Handle: RePEc:taf:glecrv:v:36:y:2007:i:2:p:137-145
    DOI: 10.1080/12265080701374073
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    References listed on IDEAS

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    1. Assaf Razin & Joel Slemrod, 1990. "Taxation in the Global Economy," NBER Books, National Bureau of Economic Research, Inc, number razi90-1, April.
    2. Assaf Razin & Joel B. Slemrod, 1990. "Introduction to "Taxation in the Global Economy"," NBER Chapters,in: Taxation in the Global Economy, pages 1-8 National Bureau of Economic Research, Inc.
    3. Bruce Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(4), pages 383-403, December.
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    Keywords

    FDI; company tax rate; VAR; Australia;

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