Monetary and Macroeconomic Determinants of Tax Revenue: The Case of Türkiye
Monetary and Macroeconomic Determinants of Tax Revenue: The Case of Türkiye

Summary/Abstract: In this study, the effects of selected monetary and macroeconomic variables on tax revenues are investigated. For this purpose, the effects of the USD/TRY exchange rate, broad money (M2), industrial production index, deposit interest rate, unemployment rate and exports on the tax revenues are analyzed with the Autoregressive Distributed Lag Model (ARDL) with monthly observations for the period between 2006:1-2022:11 in Türkiye. The empirical findings reveal that there is a cointegration relationship between tax revenues and all series. According to the long-run coefficient estimates, the broad money (M2), industrial production index, deposit interest rate and export series affect the tax level positively, while the unemployment rate and USD/TRY exchange rate affect the tax level negatively. Furthermore, the results show that the broad money (M2) has the greatest effect in tax revenues. In this context, it is recommended that the tax authorities seeking to increase tax revenues should pay more attention to the effect of broad money (M2), as well as other indicators, on tax revenues when determining the tax policy targets.

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