Hasan, Dr. Syed Akif and Subhani, Muhammad Imtiaz and Osman, Ms. Amber (2011): An investigation of granger causality between tax revenues and government expenditures. Forthcoming in: European Journal of Scientific Research
Download (74Kb) | Preview
The nexus between government revenue and government expenditure always wins the attention of policy makers and think tanks while they work four making fiscal policies for an economy. This paper is an empirical investigation on the unidirectional causality between government expenditures and the revenues, which government collects from public in shape of various levied taxes. Annual data for Pakistan from the period of 1979 to 2010 for governmental expenditures and its tax revenue have been collected. While, the unidirectional and bidirectional causality were interrogated via applying Granger causality for the outlined variables. The results indicate that there is an uni-directional causality between the expenditures and revenues, which runs from tax revenues to govt. expenditures, that is the previous lags of tax revenue has a causal impact on the current govt. spending.
|Item Type:||MPRA Paper|
|Original Title:||An investigation of granger causality between tax revenues and government expenditures|
|English Title:||An Investigation of Granger Causality between Tax Revenues and Government Expenditures|
|Keywords:||tax revenue, government expenditure, fiscal policy, granger causality,economy|
|Subjects:||E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E62 - Fiscal Policy|
|Depositing User:||Muhammad Imtiaz Subhani|
|Date Deposited:||02. Jan 2012 16:03|
|Last Modified:||14. Feb 2013 13:45|
Baffes, J., & A., Shah (1990). Taxing choices in deficit reduction. Policy Research The World Bank. Working Paper Series, 556.
Baghestani, H. (2004). The Causal Relation between Government Revenue and Spending: Evidence from Egypt and Jordan. Journal of Economics and Finance, 28, 260-269.
Buchanan, J. M., & R., E. Wagner (1977). Democracy in Deficit, New York: Academic Press.
Fasano, U., & Q., Wang (2002). Testing the Relationship between Government Spending and Revenue: Evidence from GCC Countries. IMF Working Papers 02/201. (Washington: International Monetary Fund)
Geweke, J (1982). Measurement of Linear Dependence and Feedback between Multiple Time Series. Journal of the American Statistical Association, 77 (378), 304-313.
Gounder, N., P. K,. Narayan & A., Prasad (2007). An empirical investigation of the relationship between government revenue and expenditure: The case of the Fiji Islands. International Journal of Social Economics. 34, 147-158.
Granger, C. W., J (1969). Investigating Causal Relations by Econometric Models and Cross-spectral Methods. Econometrica, 37 (3), 424-438.
Hondroyiannis, G & E., Papapetrou (1996). An Examination of the Causal Relationship between Government Spending and Revenue: A Cointegration analysis. Public Choice, 89, 363-374.
Keho, Y (2010). Budget balance through revenue or spending adjustments? An econometric analysis of the Ivorian budgetary process, 1960 – 2005. Journal of Economics and International Finance, 2(1), 001-011.
Meltzer, A.H, & S. F., Richard (1981). A rational theory of the size of the government. Journal of Political Economy, 89, 914-927.
Nanthakumar, L., & R, Taha (2007). Have Taxes Led Government Expenditure in Malaysia? Journal of International Management Studies.
Nanthakumar, L., & R., Taha (2008). Causality between tax revenue and government spending in Malaysia. The International Journal of Business and Finance, 2, 63-73.
Narayan, P.K., & S., Narayan (2006). Government revenue and government expenditure nexus: evidence from developing countries. Applied Economics, 38, 285–291.
Peacock, S.M., & Wiseman, J. (1979). Approaches to the Analysis of Government Expenditures Growth. Public Finance Quarterly, 7, 3-23.
Schwarz, G. E (1978). Estimating the dimension of a model. Annals of Statistics, 6 (2), 461–464.
Sobhee, S. K (2004). The causality between tax and spend of the public sector in maturities: A VECM approach. International Journal of Applied Econometrics and Quantitative Studies, 1-3, 115-130.