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Causal Link between Central Government Revenue and Expenditure: Evidence for India

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  • Yashobanta Parida

    ()
    (INSTITUTE OF ECONOMIC GROWTH)

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    Abstract

    This paper attempts to analyze the causal relationship between central government revenue and expenditure for India using annual data over the period 1970-2010. The Johansen cointegration test suggests that there is a long-run relationship among the variables. The result from Granger causality test based on Vector Error Correction Models (VECM) suggests unidirectional causality from expenditure to revenue in the long-run supporting Spend-and-Tax hypothesis. The short-run Granger causality test based on WALD test restriction suggests that there is no causal relationship between the variables.

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I4-P270.pdf
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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 32 (2012)
    Issue (Month): 4 ()
    Pages: 2808-2816

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    Handle: RePEc:ebl:ecbull:eb-12-00493

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    Related research

    Keywords: Revenue; Expenditure; fiscal Deficit;

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    1. Ananda Jayawickrama & Tilak Abeysinghe, 2006. "Sustainability of Fiscal Deficits : The US Experience 1929-2004," Governance Working Papers 21924, East Asian Bureau of Economic Research.
    2. Baffes, John & Shah, Anwar, 1994. "Causality and comovement between taxes and expenditures: Historical evidence from Argentina, Brazil, and Mexico," Journal of Development Economics, Elsevier, vol. 44(2), pages 311-331, August.
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