The Linkage between Regional Economic Indexes and Tax Bases: Evidence from New York

43 Pages Posted: 28 Sep 2004

See all articles by Jason Bram

Jason Bram

Federal Reserve Bank of New York

Andrew Haughwout

Federal Reserve Bank of New York

James Orr

Federal Reserve Bank of New York

Robert W. Rich

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Rae D. Rosen

Federal Reserve Bank of New York

Date Written: June 2004

Abstract

This paper examines the linkage between economic activity and tax revenues for New York State and New York City. Drawing upon the methodology of Stock and Watson, we use a dynamic single-factor model to estimate indexes of coincident economic indicators. We also construct measures of the sales and withholding tax bases. To conduct an empirical analysis of the relationship between the indexes of economic activity and the tax base series, we use vector autoregression and error correction models. The results provide strong evidence that the coincident indexes contain useful information for explaining monthly growth in the tax bases. However, much less evidence exists of a statistically significant linkage from the tax bases to the coincident indexes.

Keywords: taxes, coincident indexes, state and local government

JEL Classification: C32, E32, H71

Suggested Citation

Bram, Jason and Haughwout, Andrew F. and Orr, James and Rich, Robert W. and Rosen, Rae D., The Linkage between Regional Economic Indexes and Tax Bases: Evidence from New York (June 2004). Available at SSRN: https://ssrn.com/abstract=595121 or http://dx.doi.org/10.2139/ssrn.595121

Jason Bram (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Andrew F. Haughwout

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-2685 (Phone)
212-720-1844 (Fax)

James Orr

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Robert W. Rich

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States
216 579-2928 (Phone)

Rae D. Rosen

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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