Causality and Comovement between Tax Rate and Budget Deficits: Further Evidence from Developing Countries

F.B. Aka and Bernard Decaluwe ()

Cahiers de recherche from Université Laval - Département d'économique

Abstract:

This paper examines the relationship between increasing budget deficits and tax rate for Benin, Côte d'Ivoire, Niger and Togo. This investigation is based on Johansen cointegration approach and Granger causality tests. The findings suggest firstly that these variables are not cointegrated for the countries under study, and the bootstrap simulations of the relation show more evidence for the robustness of the results to small sample size effects, and secondly that there is a bidirectional impact between tax rate and budget deficits. Given this bidirectional causality between these variables, variance decomposition and impulse responses are calculated to better understand the question of which effect is greater than the other.

Keywords: Tax Rate; Budget Deficit; Cointegration; Causality; Bootstrap (search for similar items in EconPapers)
JEL-codes: C1 H2 H62 (search for similar items in EconPapers)
Date: 1999
New Economics Papers: this item is included in nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Causality and Comovement Between Tax Rate and Budget Deficits: Further Evidence from Developing Countries (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:laeccr:9911

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