Authors: Grigorios Spirakis, Antonios Sarantidis, Dimitrios Thomakos

Title: Tax Policy, FDI and Economic Growth in Greece

Abstract

This paper examines the ralationship between tax policies, foreign direct investments and economic growth . The aim of this paper is to analyze and to estimate the effect that frequent changes and modifications of  tax policies have on the FDI and economic growth in Greece. The sample is based on time series data with annual obsrvations from 1975 to 2014. The empirical part utilizes the Granger causality tests and the methodologies of OLS regressions, GARCH and GARCH-M. Furthermore, GARCH-M allows for testing the effects of tax policies on the conditional variance of FDI and GDP growth. In this paper, tax policies are measured as the annual number of tax legislation changes that have a direct impact on the income of citizens and businesses. The results suggest that frequent changes of tax policies and tax legislation are negative associated with GDP growth and FDI. The research provides to policy makers insights into the effects that an unstable tax enviroment has on FDI and economic growth.