INVESTMENTS AND TAXES IN ARMENIA (1997–2008)

Abstract

Present paper investigates the effect of changes in investment and taxes on the economic growth. Using quarterly data from 1997 to 2008 for Armenian economy we showed that the effect of the increase in investment and taxes on real GDP is positive or negative. The interrelation between GDP and investment is studied using the approach based on the development of VAR model. The analysis of this model allowed studying the behaviour of curves representing GDP and investment. In fact, we showed that the GDP curve is stable and oscillated and the investment curve is stable and none oscillated. Furthermore, we evaluated the impact of investment changes by 1% on the GDP growth which was equal to 0.4%. Then the model representing interrelation between GDP and taxes allowed evaluating the effect of tax changes by 1%. The findings allowed evaluating the effect of growth in investment and taxes depending on the GDP growth rate. Simultaneously, VAR system allowed evaluating the changes in GDP on the investment growth.