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Is the Thai Government Revenue-Spending Nexus Asymmetric?

Jiranyakul, Komain (2017): Is the Thai Government Revenue-Spending Nexus Asymmetric?

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Abstract

This paper examines the relationship between government revenue and spending in Thailand using a nonlinear framework. Both TAR and MTAR models are estimated. The empirical results from the estimate of the TAR model show the presence of asymmetry in the long-run relationship between revenue and spending. The results of short-run dynamics indicate that both revenue and spending respond to budgetary disequilibrium when there is improving government budget. Furthermore, bidirectional causality is found. The evidence appears to support the fiscal synchronization hypothesis with asymmetric adjustment towards the long-run equilibrium. This finding implies that policymakers should cut deficits when they exceed the threshold level.

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