Trade Liberalization, Exchange Rate Changes, and Tax Revenue in Sub-Saharan Africa

Temisan D. Agbeyegbe (), Janet G. Stotsky () and Asegedech WoldeMariam

No 403, Hunter College Department of Economics Working Papers from Hunter College: Department of Economics

Abstract: Empirical evidence on the relationship between trade liberalization, exchange rates, and tax revenue is mixed. This paper examines these linkages anew. Using a panel of 22 countries in Sub-Saharan Africa, over 1980–1996, we perform Generalized Method of Moment regressions to test this relationship. We find evidence that the relationship between trade liberalization and tax revenue is sensitive to the measure used to proxy trade liberalization, but that, in general, trade liberalization is not strongly linked to aggregate tax revenue or its components—though with one measure, it is linked to higher income tax revenue. Currency appreciation and higher inflation show some linkage to lower tax revenues or its components. These results show some partial consistency with previous findings, and support the notion that trade liberalization accompanied by appropriate macroeconomic policies can be undertaken in a way that preserves overall revenue yield.

Keywords: Trade liberalization; exchange rates; tax revenue; Sub-Saharan Africa (search for similar items in EconPapers)
JEL-codes: F4 H2 H87 O24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-ifn
Date: 2004, Revised 2004
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Related works:
Journal Article: Trade liberalization, exchange rate changes, and tax revenue in Sub-Saharan Africa (2006)
Working Paper: Trade Liberalization, Exchange Rate Changes, and Tax Revenue in Sub-Saharan Africa (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:htr:hcecon:403

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