Journal of Applied Finance & Banking

Panel-Data Analysis of Capital Account Liberalization and Tax Revenue

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• Abstract

   

  The main motive behind financial repression is fiscal. The government wishes to promote development but lacks the resources to do so. In fact, financial repression is an instrument of government revenue management. This paper examines the impact of capital account liberalization on government's tax revenue. I test the hypothesis empirically, using panel data on 149 countries over the period 1970-2017. Historically, I find that the positive impact of capital account liberalization on tax revenue is predominant in countries where the depth of the banking sector is greater.

   

  JEL classification numbers: O11, H2, G2.

  Keywords: Tax, Capital account Liberalization, Bank credit, Panel data.