Abstract:

The monetary policy horizon is generally known in OECD countries, but the fiscal or tax policy horizon is not usually subjected to empirical analyses. Therefore the aim of the article is to determine the optimal tax policy horizon, and thus its strongest impact on economic growth in OECD countries, according to the overall tax burden and individual types of taxes. We use a dynamic panel model to achieve this aim. The results of analysis show that fiscal policy influences the growth the strongest with the 2-year lag. It is also shown with a lag of 3 years and the effect is still very strong. From this it is evident that fiscal policy horizon is between 2-3 years. It is also showed that personal income tax, including social security contributions, is the most harmful to economic growth. It harms the economic growth five times stronger than corporate taxes and it exhibits its effects with 3 years lag.