Advances in Economics, Management and Political Sciences
- The Open Access Proceedings Series for Conferences
Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
Series Vol. 52 , 01 December 2023
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The Impact of Tax Cuts on Exchange Rate Changes in The Context of High Inflation and High Debt: Evidence from The UK "Mini-Budget"
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Abstract
This research mainly focuses on the exchange rate fluctuations after the British government of Liz Truss announced to introduce the tax reduction policies, mini-budget. This budget covers the abolition of the highest 45% income tax rate, turning down the income tax and partial stamp duty, aiming to provide greater tax relief to the wealthy to encourage investment and consumption. Based on the SVAR, in the case of high inflation and high debt, tax reduction policies may further intensify the pressure of currency depreciation, leading to a significant decline in the exchange rate. In addition, this paper found that fiscal expenditures and inflation rate have significant and persistent impact on the exchange rate. The conclusion of this research emphasizes that the tax reduction policies in the context of high inflation and high debt will exacerbate the exchange rate fluctuations, which has important implications for policy makers and market participants. In the current highly unstable global economy, a deep understanding of the impact of tax reduction policies on the money market is crucial for stabilizing the economy and monetary system.
Keywords
mini-budget, tax reduction policy, high inflation, exchange rate
References
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Data Availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
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- Volume Title
- Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
- ISBN (Print)
- 978-1-83558-151-3
- ISBN (Online)
- 978-1-83558-152-0
- Published Date
- 01 December 2023
- Series
- Advances in Economics, Management and Political Sciences
- ISSN (Print)
- 2754-1169
- ISSN (Online)
- 2754-1177
- DOI
- 10.54254/2754-1169/52/20230700
- Copyright
- 01 December 2023
- Open Access
- This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited