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Tax Revenue Implications of the Real Exchange Rate: Econometric Evidence from Korea and Mexico

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  • Virginia Fierro
  • Helmut Reisen

Abstract

The variety of channels through which devaluation of the exchange rate impacts on real tax receipts, calls for empirical clarification. This paper should be seen as a first attempt towards empirical evidence. It establishes the causal relationships between the real exchange rate and real tax receipts. A causality test rejects the hypothesis of unidirectional causality running from taxes to the exchange rate. The causal inferences from the Sims test allow to use the real exchange rate as an exogenous determinant in a simple simultaneous equation model. The model endogenises tax yields and tax bases to allow for a test of the significance and relevance of the exchange rate to explain variations in real tax receipts. An important insight results from the distinction of the direct (price) effect and indirect (output) effect of changes in the real exchange rate on tax receipts. A double-logarithmic version of the model with (seasonally adjusted) quarterly data is estimated for Korea and ... Les diverses voies par lesquelles la dévaluation du taux de change influe sur les recettes fiscales réelles demandent à être éclaircies au moyen de l'économètrie. Il convient de considérer le présent document comme une première tentative de démonstration économétrique. Il met en évidence les relations de causalité qui existent entre le taux de change réel et les recettes fiscales réelles. Un test de causalité conduit à rejeter l'hypothèse d'une relation unidirectionnelle traduisant une influence des impôts sur le taux de change. Les inférences causales du test de Sims autorisent à utiliser le taux de change réel comme déterminant exogène dans un modèle simple à équations simultanées. Le modèle endogénéise le produit et l'assiette de l'impôt de façon à permettre de tester la validité et le degré de signification d'une explication des variations des recettes fiscales réelles par le taux de change. La décomposition de l'effet des variations du taux de change réel sur les recettes ...

Suggested Citation

  • Virginia Fierro & Helmut Reisen, 1990. "Tax Revenue Implications of the Real Exchange Rate: Econometric Evidence from Korea and Mexico," OECD Development Centre Working Papers 12, OECD Publishing.
  • Handle: RePEc:oec:devaaa:12-en
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    File URL: http://dx.doi.org/10.1787/171303142365
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