Share:


The impact of standard value added tax on economic growth in CEE-5 countries: econometric analysis and simulations

    Mihaela Simionescu Affiliation
    ; Lucian-Liviu Albu Affiliation

Abstract

The value added tax (VAT), as an instrument of fiscal policy, might have an important role on economic growth. This study analyzes the impact of standard VAT rate on economic growth in five Central and Eastern European countries (CEE-5) (Bulgaria, Czech Republic, Hungary, Poland and Romania). Different types of panel data models (random effect model, dynamic panel and panel vector-autoregression) over 1995–2015 indicated a positive influence of VAT rate on economic growth. There is a bilateral Granger causality between economic growth and VAT rate. The Bayesian linear models indicate a positive effect of VAT rate on GDP rate only for Hungary. On short-run, the other countries register lower GDP rates when VAT rates increase. Some simulations of economic growth for 2016 and 2018 were made for each CEE-5 country under different assumptions regarding VAT rate values.


First published online: 23 Nov 2016

Keyword : VAT rate, panel data, Bayesian model, economic growth

How to Cite
Simionescu, M., & Albu, L.-L. (2016). The impact of standard value added tax on economic growth in CEE-5 countries: econometric analysis and simulations. Technological and Economic Development of Economy, 22(6), 850-866. https://doi.org/10.3846/20294913.2016.1244710
Published in Issue
Nov 24, 2016
Abstract Views
355
PDF Downloads
1353
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.