IDEAS home Printed from https://ideas.repec.org/p/fip/fednsr/188.html
   My bibliography  Save this paper

The linkage between regional economic indexes and tax bases: evidence from New York

Author

Abstract

This paper examines the linkage between economic activity and tax revenues for New York State and New York City. Drawing upon the methodology of Stock and Watson, we use a dynamic single-factor model to estimate indexes of coincident economic indicators. We also construct measures of the sales and withholding tax bases. To conduct an empirical analysis of the relationship between the indexes of economic activity and the tax base series, we use vector autoregression and error correction models. The results provide strong evidence that the coincident indexes contain useful information for explaining monthly growth in the tax bases. However, much less evidence exists of a statistically significant linkage from the tax bases to the coincident indexes.

Suggested Citation

  • Jason Bram & Andrew F. Haughwout & James A. Orr & Robert W. Rich & Rae D. Rosen, 2004. "The linkage between regional economic indexes and tax bases: evidence from New York," Staff Reports 188, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednsr:188
    as

    Download full text from publisher

    File URL: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr188.html
    Download Restriction: no

    File URL: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr188.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    2. Dye, Richard F. & McGuire, Therese J., 1991. "Growth and Variability of State Individual Income and General Sales Taxes," National Tax Journal, National Tax Association;National Tax Journal, vol. 44(1), pages 55-66, March.
    3. Theodore M. Crone, 1994. "New indexes track the state of the states," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 19-31.
    4. Mark, Stephen T. & McGuire, Therese J. & Papke, Leslie E., 2000. "The Influence of Taxes on Employment and Population Growth: Evidence From the Washington, D.C. Metropolitan Area," National Tax Journal, National Tax Association;National Tax Journal, vol. 53(1), pages 105-124, March.
    5. Theodore M. Crone, 2002. "Consistent economic indexes for the 50 states," Working Papers 02-7, Federal Reserve Bank of Philadelphia.
    6. Auerbach, Alan J. & Hines, James Jr., 2002. "Taxation and economic efficiency," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 21, pages 1347-1421, Elsevier.
    7. Keith R. Phillips, 1988. "New tools for analyzing the Texas economy: indexes of coincident and leading economic indicators," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Jul, pages 1-13.
    8. 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, Oxford University Press, vol. 117(4), pages 1329-1368.
    9. James A. Orr & Robert W. Rich & Rae D. Rosen, 2001. "Leading economic indexes for New York State and New Jersey," Economic Policy Review, Federal Reserve Bank of New York, issue Mar, pages 73-94.
    10. Theodore M. Crone, 2000. "A new look at economic indexes for the states in the Third District," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 3-14.
    11. Dye, Richard F. & McGuire, Therese J., 1991. "Growth and Variability of State Individual Income and General Sales Taxes," National Tax Journal, National Tax Association, vol. 44(1), pages 55-66, March.
    12. James A. Orr & Rae D. Rosen, 1997. "The New York - New Jersey job recovery," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 3(Oct).
    13. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    14. Mark, Stephen T. & McGuire, Therese J. & Papke, Leslie E., 2000. "The Influence of Taxes on Employment and Population Growth: Evidence from the Washington, D.C. Metropolitan Area," National Tax Journal, National Tax Association, vol. 53(n. 1), pages 105-24, March.
    15. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409, National Bureau of Economic Research, Inc.
    16. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-193, January.
    17. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    18. Kevin J. Babyak & Theodore M. Crone, 1996. "Looking ahead: leading indexes for Pennsylvania and New Jersey," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 3-14.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. James A. Orr & Rae D. Rosen, 2004. "New York and New Jersey poised for modest job growth in 2005," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 10(Dec).
    2. Alan Clayton-Matthews & Theodore M. Crone, 2004. "Consistent economic indexes for the 50 states," Working Papers 04-9, Federal Reserve Bank of Philadelphia.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eleni Constantinou & Avo Kazandjian & Georgios P. Kouretas & Vera Tahmazian, 2008. "Common Stochastic Trends Among The Cyprus Stock Exchange And The Ase, Lse And Nyse," Bulletin of Economic Research, Wiley Blackwell, vol. 60(4), pages 327-349, October.
    2. Rudd, Jeremy & Whelan, Karl, 2002. "A Note on the Cointegration of Consumption, Income, and Wealth," Research Technical Papers 5/RT/02, Central Bank of Ireland.
    3. Norah Al-Ballaa, 2005. "Test for cointegration based on two-stage least squares," Journal of Applied Statistics, Taylor & Francis Journals, vol. 32(7), pages 707-713.
    4. Caner, Mehmet, 1998. "Tests for cointegration with infinite variance errors," Journal of Econometrics, Elsevier, vol. 86(1), pages 155-175, June.
    5. Rossiter, R. D., 1995. "Monetary policy indicators after deregulation," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(2), pages 207-223.
    6. Lucey, Brian M. & Voronkova, Svitlana, 2005. "Russian equity market linkages before and after the 1998 crisis : evidence from time-varying and stochastic cointegration tests," BOFIT Discussion Papers 12/2005, Bank of Finland, Institute for Economies in Transition.
    7. Bierens, Herman J., 1997. "Nonparametric cointegration analysis," Journal of Econometrics, Elsevier, vol. 77(2), pages 379-404, April.
    8. Österholm, Pär, 2003. "Testing for Cointegration in Misspecified Systems –A Monte Carlo Study of Size Distortions," Working Paper Series 2003:21, Uppsala University, Department of Economics.
    9. Baker, Mindy Lyn, 2009. "Three essays concerning agriculture and energy," ISU General Staff Papers 200901010800001849, Iowa State University, Department of Economics.
    10. Bernard Njindan Iyke, 2015. "On the Term Structure of South African Interest Rates: Cointegration and Threshold Adjustment," Working Papers 557, Economic Research Southern Africa.
    11. Kyophilavong, Phouphet & Shahbaz, Muhammad & Anwar, Sabeen & Masood, Sameen, 2015. "The energy-growth nexus in Thailand: Does trade openness boost up energy consumption?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 46(C), pages 265-274.
    12. Bernard Njindan Iyke, 2017. "On the term structure of South African interest rates: cointegration and threshold adjustment," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 9(4), pages 300-321.
    13. Bierens, H.J., 1995. "Nonparametric cointegration analysis," Other publications TiSEM aa45c4fa-ef46-43a6-b14e-b, Tilburg University, School of Economics and Management.
    14. Jardet, Caroline, 2004. "Why did the term structure of interest rates lose its predictive power?," Economic Modelling, Elsevier, vol. 21(3), pages 509-524, May.
    15. Antonio E. Noriega & Manuel Ramos-Francia & Cid Alonso Rodríguez-Pérez, 2015. "Money demand estimations in Mexico and of its stability 1986-2010, as well as some examples of its uses," Working Papers 2015-13, Banco de México.
    16. Francisco de Castro & José M. González-Páramo & Pablo Hernández de Cos, 2001. "Evaluating the dynamics of fiscal policy in Spain: patterns of interdependence and consistency of public expenditure and revenues," Working Papers 0103, Banco de España.
    17. Philip Bodman, 1997. "The Australian Trade Balance and Current Account: a Time Series Perspective," International Economic Journal, Taylor & Francis Journals, vol. 11(2), pages 39-57.
    18. Kirstin Hubrich & Helmut Lutkepohl & Pentti Saikkonen, 2001. "A Review Of Systems Cointegration Tests," Econometric Reviews, Taylor & Francis Journals, vol. 20(3), pages 247-318.
    19. Samih Antoine Azar & Angelic Salha, 2017. "The Bias in the Long Run Relation between the Prices of BRENT and West Texas Intermediate Crude Oils," International Journal of Energy Economics and Policy, Econjournals, vol. 7(1), pages 44-54.
    20. Jeremy Rudd & Karl Whelan, 2006. "Empirical Proxies for the Consumption-Wealth Ratio," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(1), pages 34-51, January.

    More about this item

    Keywords

    Taxation; Revenue; Economic indicators; Economic conditions - New York (State); Economic conditions - New York (N.Y.); Federal Reserve District; 2nd;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fednsr:188. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/frbnyus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: https://edirc.repec.org/data/frbnyus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.