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The Nexus among Domestic Investment, Taxation, and Economic Growth in Germany: Cointegration and Vector Error Correction Model Analysis

Author

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  • Bakari, Sayef
  • Ahmadi, Ali
  • Tiba, Sofien

Abstract

The development of endogenous growth theory has opened an avenue through which the effects of taxation on economic growth can be explored. Indeed, several empirical studies have examined the effect of many criteria, typically measured as domestic investment, on economic growth. This study reviews the theoretical and empirical evidence to assess whether a consensus arises as to how taxation affects the rate of economic growth. It is shown that the theoretical models isolate several channels through which taxation can affect growth and that these effects may be very. Our empirical facts record that both taxation of corporate and domestic investment positively influence economic growth, as well as, economic growth can affect taxation.

Suggested Citation

  • Bakari, Sayef & Ahmadi, Ali & Tiba, Sofien, 2019. "The Nexus among Domestic Investment, Taxation, and Economic Growth in Germany: Cointegration and Vector Error Correction Model Analysis," MPRA Paper 96655, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:96655
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    References listed on IDEAS

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    1. Sayef Bakaria, 2019. "If France Continues This Strategy, Taxes Will Destroy Domestic Investment And Economic Growth," Journal of Smart Economic Growth, , vol. 4(1), pages 31-45, Mars.
    2. Arnold Zellner & Jacques Kibambe Ngoie, 2015. "Evaluation of the Effects of Reduced Personal and Corporate Tax Rates on the Growth Rates of the U.S. Economy," Econometric Reviews, Taylor & Francis Journals, vol. 34(1-2), pages 56-81, February.
    3. William G. Gale & Aaron Krupkin & Kim Rueben, 2015. "The Relationship Between Taxes and Growth at the State Level: New Evidence," National Tax Journal, National Tax Association;National Tax Journal, vol. 68(4), pages 919-942, December.
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    5. Ojede, Andrew & Yamarik, Steven, 2012. "Tax policy and state economic growth: The long-run and short-run of it," Economics Letters, Elsevier, vol. 116(2), pages 161-165.
    6. Andreas Bergh & Martin Karlsson, 2010. "Government size and growth: Accounting for economic freedom and globalization," Public Choice, Springer, vol. 142(1), pages 195-213, January.
    7. Ferede, Ergete & Dahlby, Bev, 2012. "The Impact of Tax Cuts on Economic Growth: Evidence From the Canadian Provinces," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(3), pages 563-594, September.
    8. Folster, Stefan & Henrekson, Magnus, 2001. "Growth effects of government expenditure and taxation in rich countries," European Economic Review, Elsevier, vol. 45(8), pages 1501-1520, August.
    9. Hlalefang Khobai & Sanderson Abel & Pierre Le Roux, 2016. "Co-integration between Electricity Supply and Economic Growth in South Africa," International Journal of Energy Economics and Policy, Econjournals, vol. 6(3), pages 637-645.
    10. Romero-Ávila, Diego & Strauch, Rolf, 2008. "Public finances and long-term growth in Europe: Evidence from a panel data analysis," European Journal of Political Economy, Elsevier, vol. 24(1), pages 172-191, March.
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    Citations

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    Cited by:

    1. Ben Yedder, Nadia & El Weriemmi, Malek & Bakari, Sayef, 2023. "The nexus between domestic investment and economic growth in MENA countries; Do Patents matter?," MPRA Paper 118174, University Library of Munich, Germany.
    2. Andrei Ionut Husman, 2020. "Taxation And Economic Development In The Former Communist Bloc. A Panel Data Approach," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 5(2), pages 83-91, September.
    3. Mkadmi, Jamel Eddine & Bakari, Sayef & Othmani, Ameni, 2021. "The Impact of Tax Revenues and Domestic Investments on Economic Growth in Tunisia," MPRA Paper 108387, University Library of Munich, Germany.
    4. Bakari, Sayef & El Weriemmi, Malek, 2022. "Causality between Domestic Investment and Economic Growth in Arab Countries," MPRA Paper 113079, University Library of Munich, Germany.
    5. Othmani, Abdelhafidh & Ben Yedder, Nadia & Bakari, Sayef, 2023. "The Cointegration Relationship between Patent, Domestic Investment and Economic Growth in United States of America," MPRA Paper 118245, University Library of Munich, Germany.
    6. Bakari, Sayef, 2022. "The Nexus between Domestic Investment and Economic Growth in Developed Countries: Do Exports matter?," MPRA Paper 114394, University Library of Munich, Germany.
    7. Bakari, Sayef, 2022. "The Impact of Digitalization and Patent on Economic Growth in Romania," MPRA Paper 113951, University Library of Munich, Germany.
    8. Bakari, Sayef & El Weriemmi, Malek, 2022. "Exploring the Impact of Agricultural Investment on Economic Growth in France," MPRA Paper 113970, University Library of Munich, Germany.
    9. Mkadmi, Jamel Eddine & Bakari, Sayef & Msai, Achwak, 2021. "Assessing the Impact of Tax Policies on Economic Growth in Tunisia: New Empirical and Policy Analysis," MPRA Paper 109023, University Library of Munich, Germany.
    10. Bakari, Sayef, 2022. "The Impact of Natural resources, CO2 Emission, Energy use, Domestic Investment, Innovation, Trade and Digitalization on Economic growth: Evidence from 52 African Countries," MPRA Paper 114323, University Library of Munich, Germany.
    11. Bakari, Sayef, 2022. "Relationship among Domestic Investment, Exports and Economic Growth: Evidence form the Case of Greece," MPRA Paper 114418, University Library of Munich, Germany.
    12. Nadia Ben Yedder & Malek El Weriemmi & Sayef Bakari, 2023. "The Impact of Domestic Investment and Trade on Economic Growth in North Africa Countries: New Evidence from Panel CS-ARDL Model," EuroEconomica, Danubius University of Galati, issue 2(42), pages 22-41, November.

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    Keywords

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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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