Tax Revenue And Economic Growth Nexus in The Gambia: Evidence From The ARDL Model

Touray, Alfusainey and Jahateh, Ndey (2024): Tax Revenue And Economic Growth Nexus in The Gambia: Evidence From The ARDL Model.

Abstract

This research paper investigates the nexus between tax revenue and economic growth in The Gambia from 2004Q1 to 2020Q4. The study employs the Autoregressive Distributed Lag (ARDL) model and bound test to analyze the dynamic relationship between tax revenue and economic growth. The bound test of cointegration confirms that tax revenue has a significant impact on both short-term and long-term economic growth in The Gambia. Furthermore, the findings reveal that tax revenue has both positive and negative effects on economic growth in the short run. Initially, tax revenue has an immediate negative impact on economic growth, but over time, within the short run, this impact becomes positive. This suggests the presence of a non-linear effect of tax revenue on economic growth in the short term. However, in the long run, tax revenue has a detrimental effect on economic growth. From a policy standpoint, these results emphasize the need for cautious utilization of tax revenue to avoid hindering long-term economic growth in The Gambia.

• Item Type: MPRA Paper
• Language: English
• Keywords: Tax revenue, aggregate income, economic growth, ARDL model, bounds testing, cointegration, The Gambia
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity

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