An Examination of Taxation Effect on Interest Rate of Bank Deposits on Gross Domestic Product: Dynamic Stochastic General Equilibrium

Recently, the topic of taxation on the interest rate on bank deposits has become o one of the new debates among economists and politicians. In this regard, the purpose of this study is investigation of the effect of taxation on the interest rate on bank deposits on gross domestic product using the Dynamic stochastic general equilibrium model in period of 1981 to 2016.  The results of the research indicate that the taxation on the profit rate of bank deposit will reduce output for two periods and increase it after two periods. On the other hand, the taxation on the interest rate on bank deposits will increase the tax base and, consequently, increase tax revenue. Other results indicate that the taxation on the interest rate on bank deposits pushes resources from banks in the short run and it increases liquidity in the community. Finally, by taxation on the bank's deposit interest rate, the net inflow of capital will decrease.