The Causal Relationship Between Government Revenue and Expenditure in Namibia

Eita, Joel Hinaunye and Mbazima, Daisy (2008): The Causal Relationship Between Government Revenue and Expenditure in Namibia.

Abstract

The relationship between government revenue and government expenditure is important, given its relevance for policy especially with respect to the budget deficit. The purpose of this paper is to investigate the relationship between government revenue and government expenditure in Namibia. It investigates the causal relationship between government revenue and government expenditure using Granger causality test through cointegrated vector autoregression (VAR) methods for the period the period 1977 to 2007. The paper tests whether government revenue causes government expenditure or whether the causality runs from government expenditure to government revenue, and if there is bi-directional causality. The results show that there is unidirectional causality from government revenue to government expenditure. This suggests unsustainable fiscal imbalances (deficit) can be mitigated by policies that stimulate government revenue.

• Item Type: MPRA Paper
• Language: English
• Keywords: government expenditure, government revenue, causality, cointegration test, revenue-spend, spend-revenue, fiscal synchronisation, Namibia
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling; H - Public Economics > H0 - General; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C50 - General; H - Public Economics > H5 - National Government Expenditures and Related Policies; H - Public Economics > H2 - Taxation, Subsidies, and Revenue

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