Tax more or spend less? Asymmetries in the UK revenue-expenditure nexus
AbstractUnlike previous research on the causal relationship between government revenues and expenditures in the United Kingdom, this study estimates an asymmetric error correction model within a momentum threshold autoregressive framework over the period 1955-2009. The results indicate that government revenues respond to short-run changes in government expenditures as well as asymmetrically to budgetary disequilibrium. With respect to the asymmetric adjustment, the response of government revenues to a worsening budget is faster (in absolute terms) than to an improving budget. Thus, contrary to previous studies on the UK, the empirical findings lend support for the spend-tax hypothesis.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Policy Modeling.
Volume (Year): 32 (2010)
Issue (Month): 4 (July)
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Web page: http://www.elsevier.com/locate/inca/505735
Revenues Expenditures Budget deficits Asymmetries;
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