Driven by the unfolding asymmetry in the United Kingdom output dynamics since 1955, this paper aims to explore the contribution of fiscal policy. To this end, the dynamic connectivity between United Kingdom government spending and economic growth is assessed through the concept of causality. Since the implementation of economic policy can asymmetrically affect output dynamics, both linear and nonlinear causality tests are employed. The empirical findings underscore the feature of nonlinearity. The detected nonlinear causality appears to be subject to different economic regimes. During the Great Moderation, the linear connectivity between government spending and economic growth strengthened, while in the post-2007 era, the absence of substantial linkages supports the idea that the information transmission channel between government spending and economic growth is broken. The study’s novelty lies in the implementation of linear and nonlinear causality tests within a rolling windows analysis framework. This approach enables the exploration of connectivity characteristics between United Kingdom government spending and output growth under changing monetary policy and economic stances. The findings confirm the role of fiscal policy as an economic stabilizer, mainly during periods of loose monetary policy with moderate inflation and predominantly positive economic growth rates. The results also reveal a significant structural break in 2007, coinciding with a change in monetary conditions and a period of limited fiscal control over output growth.

This study aims to explore the causal relationship between government expenditures and economic growth in the UK. The analysis emphasizes on the nonlinearity facet of the explored causality. In this aspect, existing conditional heteroscedasticity as a potential source of bias, is filtered out with the use of the nonparametric Diks and Panchenko causality test. The UK government expenditures are disaggregated into total managed expenditure (TGE), current expenditure (CGE) and net investment (IGE), in order to account for a possible heterogeneity in a causality disclosure linked to the nature of expenditures. The findings support that UK government spending Granger causes nonlinearly UK economic growth. Overall, government spending at all three levels of disaggregation is documented to influence the economic growth in the UK. In this aspect, the results move along with the endogenous growth literature. However, in a policy making framework, the disclosed nonlinearity patterns stress the high risk involved whenever economic growth is pursued restrictively via public spending policies overlooking other important elements of the economic life (e.g. market structure, macroeconomic environment, etc.). Additionally, the exhibited nonlinearity in the examined causality could be regarded as a likely cause of the widespread diversification of the findings in the field empirical literature.

The objective of the study is to investigate for non-linear causality running from a set of alternative tax burden ratios — i.e. total tax burden, tax burden on production and imports, tax burden on personal income and, tax burden on corporate income — to per capita GDP growth. The study employs tax revenues and GDP U.S. government data for the period 1948:1–2008:4 in two non-linear causality tests, developed by Hiemstra and Jones, 1994, Diks and Panchenko, 2006. Using the two alternative tests serves the need for evaluating the role of heteroskedasticity as a non-linear causality-affecting factor. In a fiscal policy framework, the study explores the GDP growth influential role of the tax burden distribution across tax-liable groups in a country's economy. The empirical findings provide two discrete policy considerations. First, when the policy challenge is to influence the GDP growth by means of taxation, this should be preferably attempted by adjusting the taxes levied on production and imports or, on corporate income. On the contrary, when stability in GDP growth is required, while a change in the tax policy is attempted, this should be preferably restricted in the field of the personal income taxation.

In the midst of the financial crisis currently unfolding in Greece, tax revenue collection is considered a top priority. This work describes a dynamic, Markov-based decision support model, aimed at predicting the behavior of a risk-neutral enterprise in Greece, and at evaluating tax policies before they are implemented. We use our model to i) analyze the effectiveness of an alternative taxation option periodically offered by the Greek government, ii) show that in the current environment, a rational enterprise has no incentive to disclose its profits, and iii) identify "virtuous" combinations of parameters which lead to full disclosure of profits. Highlights We propose a parametric Markov-based DSS model for tax evasion by Greek firms. An alternate tax option used by the government raises the incentive for tax evasion. We compute the firm's optimal behavior given the parameters of the tax system. Our model is used to identify tax parameters which are effective and fair. In today's setting, it is optimal for a risk-neutral rational firm to evade taxes.

We consider a collection of countries which attempt to maximize their corporate tax revenue, the latter being viewed as a function of Foreign Direct Investment (FDI) inflow and the Effective Average Tax Rate (EATR) which each country sets for itself. Under a model that assumes a direct influence of tax differentials on the flow of FDI, each country's decisions are naturally ‘coupled’ to those of others, leading to a non-cooperative game in which countries–players compete for FDI inflows by sequentially altering their tax rates. Their decisions are made via a differential equation-based model used to predict the effect of tax rate changes on a player's share of FDI inflows. Our model, calibrated using empirical data from 12 OECD countries for the period 1982–2005, combines FDI inflow and tax-rate differentials to arrive at a “steady-state” FDI inflow share for each player, given its competitors' corporate tax rates. We explore the game's equilibrium, including the question of whether equilibrium necessarily implies a ‘race to bottom’, with low corporate tax rates for all players.

The purpose of the study is to investigate whether corporate tax policy announcements affect the systematic risk of bank returns in the Athens Stock Exchange for the period: 2001-2006. The study examines the role of Greek financial market as a transmission mechanism for the tax policy announcements released in a period following major institutional changes. The impact of such announcement is studied through the calculation of time-varying betas. To this aim we use a modified BEKK-GARCH model including the effects of tax policy announcements in its conditional variance equation. Empirical findings indicate that corporate tax announcements do not have an obvious statistically significant effect on the systematic risk of bank returns.

This paper is an attempt to test for nonlinear structure and chaos indicators on the returns of bank stocks listed in Athens Exchange (ATHEX) as well as the indices: ATHEX Composite index. FTSE/ASE 20 and FTSE/ASE mid 40.