The Effects of Tax Shocks on GNP and Inflation in Iran, A DSGE Approach

Year 2023, Volume: 31 Issue: 55, 253 - 264, 31.01.2023

Seyed-nezamuddin Makiyan , Seyed Mohamad Saleh Najafi Farashah

https://doi.org/10.17233/sosyoekonomi.2023.01.13

Abstract

This study investigates indirect tax shocks' influences on GDP and inflation in Iran’s economy, using a DSGE (Dynamic Stochastic General Equilibrium) model. The results indicate that a shock cause equal to one standard deviation in tax on consumption can reduce GDP by 0.006% and inflation by 0.018%. Also, a shock in the import tax causes the GDP to decrease by 0.089% due to the decrease in demand for imported goods. Moreover, imported goods reduce by 0.4% with the occurrence of import tax shock; meanwhile, inflation increases by 0.89% in the short term. Accordingly, a possible reform for indirect taxes should be more carefully considered.

Keywords

Tax Shock, Consumption Tax, Import Tax, Dynamic Stochastic General Equilibrium Model

Supporting Institution

Yazd University

Project Number

--

Thanks

Thanks to Editor.

İran’da Vergi Şoklarının GSMH ve Enflasyon Üzerindeki Etkisinin Dinamik Stokastik Genel Denge Yaklaşımı ile Analizi

Abstract

Bu çalışma, İran ekonomisinde dolaylı vergi şoklarının GSMH ve enflasyon üzerindeki etkilerini bir DSGD (Dinamik Stokastik Genel Denge) modeli kullanarak incelemektedir. Sonuçlar, tüketim vergisindeki standart sapmaya eşit bir şok nedeninin GSMH'yı %0,006 ve enflasyonu %0,018 azaltabileceğini göstermektedir. İthalat üzerinden alınan vergilerdeki bir şok ise, ithal mallara olan talebin azalması nedeniyle GSMH'nın %0,089 oranında düşmesine neden olmaktadır. Ayrıca, ithalat üzerinden alınan vergi şokunun meydana gelmesiyle ithal mallar %0,4 oranında azalırken; enflasyon kısa vadede %0,89 artmaktadır. Bu bağlamda, dolaylı vergiler için olası bir reform çalışması yapılırken daha dikkatli bir şekilde konu ele alınmalı ve tartışılmalıdır.

Keywords

Vergi Şoku, Tüketim Vergisi, İthalat Vergisi, Dinamik Stokastik Genel Denge Modeli

Project Number

--

References

• Aghion, P. & P. Howitt (1996), “Research and development in the growth process”, Journal of Economic Growth, 1(1), 49-73.
• Alesina, A. & S. Ardagna (2010), “Large changes in fiscal policy: Taxes versus spending”, Tax Policy and the Economy, 24(1), 35-68.
• Arnold, J.M. et al. (2011), “Tax policy for economic recovery and growth”, The Economic Journal, 121(550), 59-80.
• Barro, R.J. & C.J. Redlick (2011), “Macroeconomic effects from government purchases and taxes”, The Quarterly Journal of Economics, 126(1), 51-102.
• Chapardar, A. & Gh. Garaei Nejad (2012), “Investigating the factors affecting tax revenues in Iran”, Financial Economics Quarterly, 6(20), 69-92.
• Correia, I.H. (1996), “Should capital income be taxed in the steady state?”, Journal of Public Economics, 60(1), 147-151.
• Dahlby, B. & E. Ferede (2012), “The impact of tax cuts on economic growth: Evidence from the Canadian provinces”, National Tax Journal, 65(3), 563-594.
• Fotros, M. & A. Dalaei Milan (2016), “Investigating the underground economy and tax evasion in the framework of Dynamic Stochastic General Equilibrium Models”, Economic Growth and Development Research, 7(25), 65-84.
• Gemmell, N. et al. (2011), “The timing and persistence of fiscal policy impacts on growth: Evidence from OECD countries”, The Economic Journal, 121(550), 33-58.
• Grossman, G.M. & E. Helpman (1991), “Quality ladders in the theory of growth”, The Review of Economic Studies, 58(1), 43-61.
• Hasanzadeh Jozdani, A. (2016), “Investigating the effect of taxes on GDP and inflation in Iran in the framework of a Dynamic Stochastic General Equilibrium Model”, (PhD) Thesis, Tarbiat Modares University.
• Heidari, H. & L. Saeedpour (2015), “Analysis of the impact of fiscal policy shocks and the growth rate of the Iranian economy in the framework of the New Keynesian model”, Economic Growth and Development Research, 5(20), 61-78.
• Jones, C.I. (1995), “R&D-based models of economic growth”, Journal of Political Economy, 103(4), 759-784.
• King, R.G. & S.T. Rebelo (1989), “Transitional dynamics and economic growth in the Neoclassical Model”, American Economic Review, 83(4), 908-931.
• Mendoza, E.G. et al. (1997), “On the ineffectiveness of tax policy in altering long-run growth: Harberger's superneutrality conjecture”, Journal of Public Economics, 66(1), 99-126.
• Mertens, K. & M.O. Ravn (2013), “The dynamic effects of personal and corporate income tax changes in the United States”, American Economic Review, 103(4), 1212-1247.
• Mirmohammadi, S.M. & N. Jannati (2016), “Investigation the statue of the tax system during 2005-2015 in Iran”, Journal of Engineering and Applied Sciences, 11(14), 3248-3253.
• Pajooyan, J. & B. Darwish (2010), “Structural reforms in the Iranian tax system”, Journal of Taxation, 18(8), 9-48.
• Pecorino, P. (1994), “The growth rate effects of tax reform”, Oxford Economic Papers, 492-501.
• Rostami, M. & S.N. Makiyan (2019), “Bayesian Unit Root Test in terms of pert observations: A case study of the daily returns of 50 active companies of Tehran Stock Exchange”, Econometric Modeling, 4(3), 59-86.
• Zhou, X. (1992), “Optimal fiscal policy in a stochastic growth model”, Journal of Economic Theory, 58(2), 250-289.