The effects of tax policy on financial markets: G3 evidence

Kerim Arin, Abdullah Mamun and Nanda Purushothman

Review of Financial Economics, 2009, vol. 18, issue 1, 33-46

Abstract: We investigate the effects of various tax policy innovations on stock market returns. By using a vector autoregressive model that controls for the mutual causality between fiscal policy and financial market performance, we test whether financial markets serve as a transmission mechanism for tax policy innovations. Our findings indicate that indirect taxes have a larger effect on market returns than do labor taxes. Further, corporate tax innovations do not have any statistically significant effect on stock returns. We consider that this finding is a result of a firm's ability to switch between equity financing and bond financing.

Date: 2009
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https://doi.org/10.1016/j.rfe.2008.05.001

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Journal Article: The effects of tax policy on financial markets: G3 evidence (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:18:y:2009:i:1:p:33-46

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