Government continuously operates with revenues below expenditures and taxation is increasingly becoming a sensitive political and economic tool to be relied upon as an instrument for revenue generation and economic growth. This study seeks to examine the impact of tax policy and donor inflows on economic growth in Malawi from 1970 to 2010 using data envelope analysis (DEA) and transcendental logarithm (Translog). In doing the Translog, the study employed the Engle and Yoo three step estimation process. Data analyzed shows that consumption taxes have on average contributed 60.0% to total tax revenue while income taxes take up 40.0%. Tax burden has ranged from 11.0% in the 1970s to around 16.0% in 2010. Results of the study show that a 1.0% decrease in tax burden can raise economic growth by 0.8% in Malawi while a similar reduction in collection of taxes through expenditure can raise growth by 0.6%. Another finding is that economic growth rises by 0.3% for a 10.0% rise in foreign grants. The study therefore finds that reduction in tax burden is more potent in influencing economic growth than fine tuning the proportion in which income and consumption taxes are collected in Malawi. Furthermore, a complete reversal in donor funding will reduce economic growth by 3.0%.
This study investigates the interest rate pass‐through in Malawi and its implications on monetary policy effectiveness. Using the cost‐of‐funds approach and monthly data from 2009 to 2015, an autoregressive distributed lag model is fitted. Results show that there is a near complete pass‐through to the lending rate but not the savings rate. The magnitude of the pass‐through is relatively higher under smaller banks. The results suggest that the structure of the banking industry matters. Market power is important in understanding the variation in lending and savings rates across banks. Overall, short‐term rates as operating targets are consistent with inflation targeting in Malawi.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.