DOI: 10.53443/anadoluibfd.1919403 ISSN: 2687-184X

THE EFFECT OF INFORMAL ECONOMY AND INFLATION ON TAX REVENUES IN TÜRKİYE: A FOURIER BASED APPROACH

Murat Albayrak
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Estimating tax capacity is of vital importance for public finance. In this regard, identifying the factors that influence tax capacity provides guidance for public financial management, supporting monitoring and the implementation of corrective actions. Accordingly, this study aims to empirically assess the impact of the informal economy and inflation on tax revenues in Türkiye. The study analyzes annual data for the period 1990–2020 using Fourier-based time-series techniques. In the first step of the empirical analysis, the stationarity properties of the time series were examined using the Fourier KPSS test, which indicated that all series were stationary at the first difference. According to the Fourier Augmented ARDL test conducted in the subsequent step, evidence supported the existence of a cointegration relationship between the series. Long-term estimates carried out in this context indicate that the informal economy has a negative and statistically significant impact on tax revenues. Inflation, on the other hand, has a positive and statistically significant effect on tax revenues. The informal economy and inflation dynamics significantly influence tax capacity in Türkiye.

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