Effects of Taxes on Exports and Imports Group 1 Sylvia Salinas Catherine Wohletz Daniel Grund Takuro Hatanaka Josh Friedberg Julio Urenda.

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Presentation transcript:

Effects of Taxes on Exports and Imports Group 1 Sylvia Salinas Catherine Wohletz Daniel Grund Takuro Hatanaka Josh Friedberg Julio Urenda

Objective Why: We want to understand how domestic taxes, and tariffs effect imports and exports. What : Determine the correlation between domestic taxes and net exports and imports. How: We will collect data on taxes, GDP, and exports. We will setup a valid model to extrapolate the relationship.

Initial Hypothesis As Domestic taxes increase, we will find that imports increase and exports will decrease.

Gathered Data GDP from 1929 to 2001 (source: Bureau of Economic Analysis) Domestic taxes form 1934 to 2008 (Source: The Whitehouse Office of Management and Budget) Exports and Imports from 1929 to 2001 (source: Bureau of Economic Analysis) Corporate Profits after taxes from 1929 to 2001 (source: Bureau of Economic Analysis) Personal Disposable Income from 1929 to 2001 (source: Bureau of Economic Analysis) Custom and duties from 1940 to 2008 (Source: The Whitehouse Office of Management and Budget)

Domestic Taxes, Exports, and Imports (in billions of dollars) vs. Years

Domestic Taxes, Exports, and Imports (as a percentage of GDP) vs. Years

The t-stat on corporate profits and domestic taxes are not significant at the 5% level. The t-stat on customs is significant at the 10% level.

All variables are significant at the 5% level.

The customs percent is not significant.

All of the values are significant at a 5% level, but it appears that domestic taxes increase exports...but there is more than one way to skin this cat.

The domestic taxes with a four year lag is significant at the 5% level, and has the expected sign on the coefficient. It also renders the current year’s domestic taxes insignificant at the 10% level.

A two year lagged value of domestic taxes also proved relevant in the case of imports, bringing R-squared from to 0.954

Results As Domestic taxes increase, exports decrease with a lag of 4 years. Imports are reduced by domestic taxes with 2 years of lag, but respond immediately to tariffs with a much greater coefficient.

Conclusion Imports are significantly deterred by tariffs, and to a lesser degree by domestic taxes with a two year lag. Exports are significantly reduced by domestic taxes with a lag of four years, but they are not effected by the tariffs. Exports are positively correlated with domestic taxes in the current year; presumably the higher taxes are a result of the higher exports.

QUESTIONS ?