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Government Tax Revenue, Expenditure and Causality: the Experience of India

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  • K. Dhanasekaran

    (Gobi Arts and Science College, Gobichettipalayam, Tamil Nadu)

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    Abstract

    The objective of the study is to analyse the dynamics of causal relationship between revenue and expenditure. Although a number of studies have shed light on this issue using Granger-Sims causality tests, the present study attempts to quantify various feedback between revenue and expenditure, along the lines suggested by Geweke and then the results are compared with Granger's causality test. The results showed the absence of co-integration between Government tax revenue and expenditure variables implying no evidence of a stable long run relationship between them. Geweke's test provided different inferences for the causal relationship between TR and GE. In the mdel with TR as the dependent variable, Geweke's test indicated the existence of bi-directional causality, while in the case of the model with GE as dependent variable, Geweke's test showed the absence of any causal relationship between the variables. The Granger's test suggests the uni-directional causality flowing from government expenditure to revenue. To conclude, the causal inferences were found to be sensitive to the specification of the model.

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    Bibliographic Info

    Article provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.

    Volume (Year): 36 (2001)
    Issue (Month): 2 (July)
    Pages: 359-379

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    Handle: RePEc:dse:indecr:v:36:y:2001:i:2:p:359-379

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    Cited by:
    1. Yaya Keho, 2010. "Spending Cuts or Tax Adjustments: How Can UEMOA Countries Control Their Budget Deficits?," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 9(3), pages 233-252, December.
    2. Francisco G. Carneiro & Joao R. Faria & Boubacar S. Barry, 2005. "Government Revenues And Expenditures In Guinea-Bissau: Causality And Cointegration," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 30(1), pages 107-117, June.

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