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Tax more or spend less? Asymmetries in the UK revenue-expenditure nexus

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  • Saunoris, James W.
  • Payne, James E.

Abstract

Unlike 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 Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 32 (2010)
Issue (Month): 4 (July)
Pages: 478-487

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Handle: RePEc:eee:jpolmo:v:32:y::i:4:p:478-487

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Web page: http://www.elsevier.com/locate/inca/505735

Related research

Keywords: Revenues Expenditures Budget deficits Asymmetries;

References

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  15. Tsangyao Chang & Wen Rong Liu & Steven Caudill, 2002. "Tax-and-spend, spend-and-tax, or fiscal synchronization: new evidence for ten countries," Applied Economics, Taylor & Francis Journals, vol. 34(12), pages 1553-1561.
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Citations

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Cited by:
  1. Trachanas, Emmanouil & Katrakilidis, Constantinos, 2013. "Fiscal deficits under financial pressure and insolvency: Evidence for Italy, Greece and Spain," Journal of Policy Modeling, Elsevier, vol. 35(5), pages 730-749.
  2. Artzrouni, Marc & Tramontana, Fabio, 2013. "The debt trap: a two-compartment train wreck," MPRA Paper 47578, University Library of Munich, Germany.
  3. Magazzino, Cosimo, 2010. "Public expenditure and revenue in Italy, 1862-1993," MPRA Paper 27308, University Library of Munich, Germany.
  4. Athanasios Athanasenas & Constantinos Katrakilidis & Emmanouil Trachanas, 2014. "Government spending and revenues in the Greek economy: evidence from nonlinear cointegration," Empirica, Springer, vol. 41(2), pages 365-376, May.

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