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General Sales Tax and Economic Growth in Small Open Developing Countries - Evidence from Jordan

Anwar Rashed Al Quraan

Montenegrin Journal of Economics, 2020, vol. 16, issue 3, 7-15

Abstract: This paper examines the long and short-term empirical relationship between general sales tax(1) and economic growth between 1980-2018 in Jordan. Standardized tests were utilized, specifically Aug-mented Dickey-Fuller and Phillip-Peron methods. From the results, it can be ascertained that the variables are integrated at different degrees and are less than two. As such, we utilized the “Auto-Regressive Distributed Lag (ARDL)†approach for co-integration to determine the relationship between variables over both short and long term periods. Its results indicated one co-integrated relation between sales tax and economic growth. Moreover, a significantly positive effect was observed on economic growth in the short run, but in contrast, long term outcomes showed a negative relationship between the variables. As such, this study concludes that an amendment is needed in the tax system to make it more beneficial for Jordanian economic growth.

Date: 2020
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Handle: RePEc:mje:mjejnl:v:16:y:2020:i:3:7-15