Corporate Marginal Tax Rate, Tax Loss Carryforwards and Investment Functions - Empirical Analysis Using a Large German Panel Data Set

29 Pages Posted: 12 Oct 2006

See all articles by Fred Ramb

Fred Ramb

Deutsche Bundesbank, Economics Department, Monetary Policy and Monetary Analysis

Multiple version iconThere are 2 versions of this paper

Date Written: Septmber 2006

Abstract

This study is the first empirical analysis to investigate the relationship between the investment behaviour of firms resident in Germany and the empirically determined marginal tax rates developed by John R. Graham. It is based on the Bundesbank's corporate balance sheet statistics for the period 1971-2002. In an autoregressive distributed lag model, the marginal tax rate is shown to be significant, with an elasticity of between 0.1 and 0.2. An error correction model does not produce any plausible results for the marginal tax rate. Graham's marginal tax rates are a complement to the methods typically used to determine the effective marginal tax rates and effective average tax rates.

Keywords: Corporate marginal tax rate, tax loss carryforward, investment behaviour

JEL Classification: D21, H25, G31, G15

Suggested Citation

Ramb, Fred, Corporate Marginal Tax Rate, Tax Loss Carryforwards and Investment Functions - Empirical Analysis Using a Large German Panel Data Set (Septmber 2006). Available at SSRN: https://ssrn.com/abstract=936900 or http://dx.doi.org/10.2139/ssrn.936900

Fred Ramb (Contact Author)

Deutsche Bundesbank, Economics Department, Monetary Policy and Monetary Analysis ( email )

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