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Tax Effects on the Real Exchange Rate

Author

Listed:
  • Stacie Beck

    (Department of Economics, University of Delaware)

  • Cagay Coskuner

    (Eastern Mediterranean University)

Abstract

This study examines the effects of taxes on the real exchange rate through their marginal impacts on economic activity. We develop a model that shows that an increase in the capital interest tax rate leads to real domestic currency depreciation while an increase in wage or consumption tax rates lead to a real domestic currency appreciation. These theoretical findings are supported by an empirical study using panel data estimations of ten OECD countries over 17 years.

Suggested Citation

  • Stacie Beck & Cagay Coskuner, 2003. "Tax Effects on the Real Exchange Rate," Working Papers 03-11, University of Delaware, Department of Economics.
    • Handle: RePEc:dlw:wpaper:03-11
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. International Monetary Fund, 2010. "Fiscal Policy and the Current Account," IMF Working Papers 2010/121, International Monetary Fund.
    2. S M Ali Abbas & Jacques Bouhga-Hagbe & Antonio Fatás & Paolo Mauro & Ricardo C Velloso, 2011. "Fiscal Policy and the Current Account," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 59(4), pages 603-629, November.
    3. Stacie Beck & Alexis Chaves, 2011. "The Impact Of Taxes On Trade Competitiveness," Working Papers 11-09, University of Delaware, Department of Economics.

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    More about this item

    Keywords

    Fiscal Policy; Taxation; Real Exchange Rates;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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