INVESTIGATING THE NON-LINEAR RELATIONSHIP BETWEEN UNDERGROUND ECONOMY AND TAX BURDEN IN IRAN: APPLICATION OF MARKOV- SWITCHING MODELS AND A SIMULATION APPROACH

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REZAEI EBRAHIM; KHAJAVI MALIHEH

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Journal: Macroeconomic Research Letter Year:2014 | Volume:9 | Issue:17 Page(s): 99-120

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Title

INVESTIGATING THE NON-LINEAR RELATIONSHIP BETWEEN UNDERGROUND ECONOMY AND TAX BURDEN IN IRAN: APPLICATION OF MARKOV- SWITCHING MODELS AND A SIMULATION APPROACH

Author(s)

REZAEI EBRAHIM | KHAJAVI MALIHEH | Issue Writer Certificate

Keywords

HIDDEN ECONOMYQ1

TAX BURDENQ2

MARKOV-SWITCHING MODELSQ2

NONLINEAR MAXIMUM LIKELIHOODQ2

A SIMULATION APPROACHQ2

Abstract

Having considered the importance of studying nonlinear relationship between variables in public finance, in this paper using time series data during the period of 1350-1386 and MARKOV-SWITCHING MODELS involving two regimes (from 1350 to 1370 in the first regime and from 1371 to 1386 in the second regime) we investigate the relationship between TAX BURDEN and HIDDEN ECONOMY. Our results, in this section, show that the TAX BURDEN has a positive and significant effect on HIDDEN ECONOMY during those two regimes. Also, we simulate the impact of changing the TAX BURDEN on the HIDDEN ECONOMY in Iran, by applying nonlinear models (like Gompertz and Logistic). Also, it is determined the "natural rate of HIDDEN ECONOMY" and the importance of taxes for the formation of a HIDDEN ECONOMY by calculating the second derivatives of the above-mentioned models. The result also shows that, in addition to the TAX BURDEN, the growth rate of the Gross domestic product (GDP), is one of the main determinants of HIDDEN ECONOMY.

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APA: Copy

REZAEI, EBRAHIM, & KHAJAVI, MALIHEH. (2014). INVESTIGATING THE NON-LINEAR RELATIONSHIP BETWEEN UNDERGROUND ECONOMY AND TAX BURDEN IN IRAN: APPLICATION OF MARKOV- SWITCHING MODELS AND A SIMULATION APPROACH. JOURNAL OF MACROECONOMICS (JOURNAL OF ECONOMICS SCIENCES), 9(17), 99-120. SID. https://sid.ir/paper/150934/en

Vancouver: Copy

REZAEI EBRAHIM, KHAJAVI MALIHEH. INVESTIGATING THE NON-LINEAR RELATIONSHIP BETWEEN UNDERGROUND ECONOMY AND TAX BURDEN IN IRAN: APPLICATION OF MARKOV- SWITCHING MODELS AND A SIMULATION APPROACH. JOURNAL OF MACROECONOMICS (JOURNAL OF ECONOMICS SCIENCES)[Internet]. 2014;9(17):99-120. Available from: https://sid.ir/paper/150934/en

IEEE: Copy

EBRAHIM REZAEI, and MALIHEH KHAJAVI, “INVESTIGATING THE NON-LINEAR RELATIONSHIP BETWEEN UNDERGROUND ECONOMY AND TAX BURDEN IN IRAN: APPLICATION OF MARKOV- SWITCHING MODELS AND A SIMULATION APPROACH,” JOURNAL OF MACROECONOMICS (JOURNAL OF ECONOMICS SCIENCES), vol. 9, no. 17, pp. 99–120, 2014, [Online]. Available: https://sid.ir/paper/150934/en

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