Journal of Economics and Development Studies

Financial Development and Tax Revenue Nexus in Turkey
Selçuk Akçay, İsa Sağbaş, Gökhan Demirtaş

Abstract
This study explores the nexus between financial development (banking and non-banking) and direct tax revenue in a multivariate framework in Turkey for the period 2006 to 2014, employing monthly data. We examined the long run equilibrium relationship between financial development and tax revenue using two different co-integration tests namely Johansen and Juselius (1990), and Hatemi-J (2008). The results of the co-integration tests indicate that direct tax revenue and financial development are co-integrated. The Vector Error Correction Model (VECM) used to investigate the short run and long-run dynamic relationship between financial development and direct tax revenue. The results reveal that banking and non-banking financial development Granger cause direct tax revenue in the long run. Only the banking sector Granger causes direct tax revenue in the short run.

Full Text: PDF     DOI: 10.15640/jeds.v4n1a10