Volume 11, Issue 3 (Summer 2016)                   J. Mon. Ec. 2016, 11(3): 283-303 | Back to browse issues page

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Gholami A, Abasinejad H. Implementation of Value-Added Tax on Iran Banking Services: An Application of DSGE Model. J. Mon. Ec.. 2016; 11 (3) :283-303
URL: http://jme.mbri.ac.ir/article-1-225-en.html
1- Department of Economics, University of Tehran
Abstract:   (1340 Views)

In the Value Added Tax (VAT) system some goods and services, such as banking services, are exempted from taxes. Based on theoretical foundations, exempt treatment leads to several distortions and inefficiencies in the economy. In order to understand the importance of exemption on macroeconomic fluctuations as well as the fundamental role of financial intermediaries in economy shocks, this study using a Dynamic Stochastic General Equilibrium (DSGE) model provides an empirical analysis for policy simulations with consideration of VAT on financial services under different scenarios. Accordingly, the values of model parameters was estimated via calibration method and also the model accuracy were evaluated by Brooks & Gelman test and impulse-response functions. Simulation results of the policy exercise suggest that shifting from exemption to full taxation, reduces the cost of bank, and increases the bank free resources leading to higher investment and output through more bank loans.

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Type of Study: Original Research - Empirical | Subject: Macroeconomics
Received: 9 Aug 2017 | Accepted: 13 Nov 2018 | Published: 9 Dec 2018

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