Are Some Taxes Different than Others? An Empirical Investigation of Tax Policy in Canada

This paper investigates the response of major macroeconomic variables to four different types of tax policy innovations in Canada within a VAR framework. The positive tax multipliers documented in the previous literature are found only for corporate tax innovations. Our results imply that different taxes affect the output differently, and the composition of the total tax response may be a major factor behind cross-country variation in the sign and magnitude of total tax multipliers. Keywords: Tax Policy, VA

Is it Inflation or Inflation Variability? A Note on the Stock Return-Inflation Puzzle

This paper investigates the effects of inflation and inflation variability on the economic and stock market activity within a VAR framework by using U.S data for the 1988:01-2002:12 period. Our results show that the detrimental effects of inflation come from the inflation variability, not the level of inflation itself

Oil Wealth and Economic Growth Revisited: A Bayesian Model Averaging Approach

We investigate the effect of oil revenues on long-term economic growth within a Bayesian framework that accounts for model uncertainty. Our anal- ysis is based on an updated cross country data set for long term growth in the period 1970-2014 including 91 countries and 54 potential growth deter- minants. Initially, we do not find any empirical evidence for the existence of the \natural resource curse in our sample. On the contrary, we document a robust positive effect of oil rents on long-term economic growth. Then, we introduce interaction terms of oil rents with potential conditions under which oil dependency can lead to sub-standard growth. Our second set of results shows that the interaction of institutional quality and oil revenues has a ro- bust positive effect on growth, while the constituent oil rent term is no longer robust. We conclude that institutional quality is necessary condition for oil revenues to have a growth-enhancing effect

International Transmission of Fiscal Shocks: An Empirical Investigation

This paper investigates how innovations in income taxes and government purchases originating in the U.S. affect the U.S. economy, and how these effects are transmitted to the Canadian economy. Using a semi-structural VAR model and data for both countries for the 1961:1-2004:3 period, we find that fiscal policy innovations originating in the U.S. are transmitted to the Canadian economy by international trade and capital flows through interest rate and exchange rate channels. Unanticipated shocks to U.S. government purchases have beggar thy neighbor effects on Canada. U.S. output increases and Canadian output decreases in response to a positive shock to U.S. government purchases. In response to an unanticipated increase in U.S. income taxes, U.S. output declines while U.S. and Canadian real interest rates rise. The response of Canadian output, however, is not significantly different from zero.

Fiscal Policy and Economic Activity: U.S. Evidence

We investigate the dynamic effects of five different fiscal shocks on the US economy using a structural vector autoregressive (SVAR) model that uses Blanchard-Quah type restrictions. We find that an increase in indirect taxes or in corporate taxes has a contractionary effect on the economy, while an increase in personal taxes is neither contractionary, nor expansionary. These results imply that the Ricardian Equivalence hypothesis holds only for personal taxes. On the spending side, we find that an increase in government wages and salaries has a contractionary effect on the economy, while an increase in defense spending is expansionary. Our results suggest that different fiscal shocks have different and offsetting effects on the economy, and using aggregated data may, therefore, conceal the effects of fiscal policy.

Revisiting the Growth Effects of Fiscal Policy: A Bayesian Model Averaging Approach

Motivated by the mixed evidence in previous literature, we reexamine the effects of various types of government spending and taxes, as well as overall budget surplus/deficit, on economic growth. To address the model uncertainty issue that may have plagued earlier studies we employ a Bayesian Model Averaging (BMA) approach. We use a panel data set for OECD countries for the 1990-2013 period, control for country and time specific effects, and allow for a wide range of other potential growth determinants. The results suggest a robust link between only some fiscal variables and economic growth. On the spending side, productive public spending has a robust positive effect on growth. On the revenue side, we document a robust negative effect for the top corporate tax rate, but, maybe surprisingly, not for any income tax variable. Finally, our results suggest that a budget surplus has a robust positive effect on economic performance. We also analyze the timing of effects and conclude that most effects occur with a lag of two years

Brutality or frequency? An empirical investigation of the effects of terrorism on economic growth in India

© Presses de Sciences Po (P.F.N.S.P.). Tous droits réservés pour tous pays. In this paper we investigate the effects of terrorism on economic growth in India. Using a Markov switching model, we find evidence that terror has a significant and negative impact on Indian economic growth. Our empirical results also show that the magnitude of these effects is larger in periods of high growth. Finally, we compare the magnitude of the effects of the brutality and the frequency of terror attacks, and conclude that the effect of the frequency is slightly higher than the effect of the brutality

Tennis serve data may elude some as serves get too fast

© 2019, Fraser Institute. All rights reserved. In our response to Krawczyk (2019), we emphasize the following points: (1) Our theoretical model incorporates a Tullock contest function which is the most commonly used tool in modelling any strategic contest, and controls for both the server’s and the receiver’s effort. (2) The panel nature of our data set allows us to control for unobserved heterogeneity at both the player and the match level and minimizes the omitted variable bias. (3) There is a difference between ‘risk’ and ‘effort.’ (4) There is a strong empirical pattern in our dataset which is robust to the use of different methodologies whether it is linear or semi-parametric. (5) Finally, given that Pope and Schweitzer (2011) was published in the top journal in the field and received a considerable number of citations, it should not come as a surprise that we apply their theoretical and empirical framework to tennis, which, like golf, has a well-defined reference point

Revisiting the Growth Effects of Fiscal Policy: A Bayesian Model Averaging Approach

© 2019 Elsevier Inc. Motivated by the mixed evidence in previous literature, we re-examine the effects of various types of government spending, taxes, and overall budget surplus/deficit, on economic growth. To address the model uncertainty issue that may have plagued earlier studies, we employ a Bayesian Model Averaging (BMA) approach. We use a panel data set for OECD countries for the 1990–2013 period, and allow for a wide range of other potential growth determinants. The results suggest a robust link between only some fiscal variables and economic growth in the short to medium run. On the spending side, productive public spending has a robust positive effect on growth. On the revenue side, we document a robust negative effect for the top corporate tax rate. Finally, our results suggest that a cyclically adjusted budget surplus has a robust positive effect on economic performance. Some, but limited, evidence points to effects of productive expenditure and of top income tax rates on medium-to-long-run growth. With regard to timing of short-to-medium run effects, our results show that most effects occur with a lag of two years

A Note on the Efficiency Effects of Agglomeration Economies: Turkish Evidence

By using a very novel dataset from Turkish SMEs, this paper investigates the effects of agglomeration economies on productive and allocative efficiency. After controlling for unobserved heterogeneity at the time level, our empirical results from ordered panel probit models provide evidence that clusters have no statistically significant effect on productive efficiency but a negative effect on allocative efficiency. We also show that the increase in prices is not due to increased product differentiation; therefore, it is most likely due to collusion