The relationship between tax revenue and economic growth in Indonesia through the endogenous growth model approach

Abstract

This study attempts to analyze the nature of the causal relationship between tax revenues and economic growth in Indonesia in the form of an economic model using an endogenous growth model. Causality analysis in this study uses a multivariate setup through a vector autoregression (VAR) approach with the Toda-Yamamoto method as a causality test. Using time series data for 1983-2021, the study results show one-way causality, where tax revenue causes changes and increases in economic growth. With this one-way causality phenomenon, the use of tax revenue variables as an instrument to boost economic growth must be optimized.