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- Title
Tax Smoothing Hypothesis: A Turkish Case.
- Authors
Turan, Taner; Karakas, Mesut; Yanikkaya, Halit
- Abstract
We tested the tax smoothing hypothesis for Turkey using annual data for the period of 1949-2010. Although our preliminary estimation results imply the existence of the weak form of tax smoothing for Turkey, further tests indicate the violation of exogeneity of permanent government spending, which is a requirement for the tax smoothing hypothesis to hold. Our causality tests indicate that permanent government spending is not exogenous due to the causality running from lagged tax rates to permanent government spending. Therefore, we conclude that our results provide evidence against the tax smoothing hypothesis. Our results are important because the existence of random-walk behavior of the tax rates alone or some preliminary regressions do not guarantee the existence of tax smoothing.
- Subjects
TURKEY; EXOGENEITY (Econometrics); FISCAL policy; TAXATION; TAX rates; PUBLIC spending
- Publication
Panoeconomicus, 2014, Vol 61, Issue 4, p487
- ISSN
1452-595X
- Publication type
Article
- DOI
10.2298/PAN1404487T