IDEAS home Printed from https://ideas.repec.org/a/eme/ijsepp/v34y2007i3p147-158.html
   My bibliography  Save this article

An empirical investigation of the relationship between government revenue and expenditure

Author

Listed:
  • Neelesh Gounder
  • Paresh Kumar Narayan
  • Arti Prasad

Abstract

Purpose - Understanding the relationship between government revenue and government expenditure is important from a policy point of view, especially for a country like Fiji, which is suffering from persistent budget deficits. The aim of this paper is to investigate the relationship between government revenue and expenditure for Fiji. Design/methodology/approach - The Johansen test for cointegration and Granger causality test are used to conduct the empirical analysis. Findings - The key findings are that: government revenue and government expenditure in both the aggregate and disaggregate sense are cointegrated; in the short‐run government expenditure Granger causes government revenue in an aggregate sense, departmental expenditure Granger causes aggregate revenue, and there is bidirectional causality running between government expenditure and customs duties; and in the long‐run there is evidence of fiscal synchronization, implying that expenditure decisions are not made in isolation from revenue decisions. Research limitations/implications - This fiscal synchronization has not been able curb the current account deficit in Fiji. Moreover, the confirmation of the spend‐tax attitude of the government does not bode well for the level of investments and skilled human capital in Fiji as this may perpetuate tax increases in the future. Given that the Fiji Government is currently trying to rein in the escalating level of fiscal deficit, it is an opportune time for them to engage in extensive expenditure reforms. Originality/value - The findings of this paper should allow policy makers to make informed decisions. Furthermore, the paper is different from others because apart from examining the revenue and expenditure in an aggregate sense, it also considers the different components of revenue and expenditure.

Suggested Citation

  • Neelesh Gounder & Paresh Kumar Narayan & Arti Prasad, 2007. "An empirical investigation of the relationship between government revenue and expenditure," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 34(3), pages 147-158, February.
    • Handle: RePEc:eme:ijsepp:v:34:y:2007:i:3:p:147-158
    DOI: 10.1108/03068290710726711
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/03068290710726711/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/03068290710726711/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/03068290710726711?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hoover, Kevin D & Sheffrin, Steven M, 1992. "Causation, Spending, and Taxes: Sand in the Sandbox or Tax Collector for the Welfare State?," American Economic Review, American Economic Association, vol. 82(1), pages 225-248, March.
    2. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    3. Scott M. Fuess, Jr. & Jack W. Hou & Meghan Millea, 2003. "Tax or Spend, What causes What? Reconsidering Taiwan's Experience," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 2(2), pages 109-119, August.
    4. Narayan, Paresh Kumar, 2005. "The government revenue and government expenditure nexus: empirical evidence from nine Asian countries," Journal of Asian Economics, Elsevier, vol. 15(6), pages 1203-1216, January.
    5. Hall, Alastair R, 1994. "Testing for a Unit Root in Time Series with Pretest Data-Based Model Selection," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(4), pages 461-470, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fuad M.M Kreishan & Mohamed Sayed Abou Elseoud & Mohammad Selim, 2018. "Oil Revenue and State Budget Dynamic Relationship: Evidence from Bahrain," International Journal of Energy Economics and Policy, Econjournals, vol. 8(6), pages 174-179.
    2. Nanthakumar LOGANATHAN & Suraya ISMAIL & Dalia STREIMIKIENE & Asan Ali Golam HASSAN & Edmundas Kazimieras ZAVADSKAS & Abbas MARDANI, 2017. "Tax Reform, Inflation, Financial Development And Economic Growth In Malaysia," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 152-165, December.
    3. Ullah, Nazim, 2016. "The relationship of government revenue and government expenditure: a case study of Malaysia," MPRA Paper 69123, University Library of Munich, Germany.
    4. Eita, Joel Hinaunye & Mbazima, Daisy, 2008. "The Causal Relationship Between Government Revenue and Expenditure in Namibia," MPRA Paper 9154, University Library of Munich, Germany.
    5. Hasan, Syed Akif & Subhani, Muhammad Imtiaz & Osman, Ms. Amber, 2011. "An investigation of granger causality between tax revenues and government expenditures," MPRA Paper 35686, University Library of Munich, Germany.
    6. Yousef Elyasi & Mohammad Rahimi, 2012. "The Causality between Government Revenue and Government Expenditure in Iran," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 5(1), pages 129-145, April.
    7. Fazal Husain & Muhammad Ali Qasim & Mahmood Khalid, 2010. "The Relationship between Federal Government Revenues and Expenditures in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 641-649.
    8. Loganathan, Nanthakumar & Mori Kogid & Suriyani Muhamad & Nor Haslina Mohamad Akhir, 2011. "Fiscal Adjustment And Dynamic Economics Performance: The Case Of Malaysia," Journal of Global Business and Economics, Global Research Agency, vol. 3(1), pages 1-10, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yaya Keho, 2010. "Spending Cuts or Tax Adjustments: How Can UEMOA Countries Control Their Budget Deficits?," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 9(3), pages 233-252, December.
    2. Aliyu Alhaji Jibrilla, 2016. "Fiscal sustainability in the presence of structural breaks: Does overconfidence on resource exports hurt government’s ability to finance debt? Evidence from Nigeria," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1170317-117, December.
    3. Shyh-Wei Chen, 2008. "Untangling the web of causalities among four disaggregate government expenditures, government revenue and output in Taiwan," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 6(1), pages 99-107.
    4. A. Phiri, 2019. "Asymmetries in the revenue–expenditure nexus: new evidence from South Africa," Empirical Economics, Springer, vol. 56(5), pages 1515-1547, May.
    5. Shyh-Wei Chen, 2008. "Are 19 Developed Countries' Real Per Capita GDP levels Non-stationary? A Revisit," Economics Bulletin, AccessEcon, vol. 3(2), pages 1-11.
    6. Murray, Christian J. & Nelson, Charles R., 2000. "The uncertain trend in U.S. GDP," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 79-95, August.
    7. Chen, Shyh-Wei & Hsu, Chi-Sheng, 2016. "Threshold, smooth transition and mean reversion in inflation: New evidence from European countries," Economic Modelling, Elsevier, vol. 53(C), pages 23-36.
    8. Paresh Kumar Narayan & Biman Chand Prasad, 2008. "Are shocks to real effective exchange rates permanent or transitory? Evidence from Pacific Island countries," Applied Economics, Taylor & Francis Journals, vol. 40(8), pages 1053-1060.
    9. Paresh Kumar Narayan & Russell Smyth, 2004. "Is South Korea's stock market efficient?," Applied Economics Letters, Taylor & Francis Journals, vol. 11(11), pages 707-710.
    10. Lean, Hooi Hooi & Smyth, Russell, 2014. "Will initiatives to promote hydroelectricity consumption be effective? Evidence from univariate and panel LM unit root tests with structural breaks," Energy Policy, Elsevier, vol. 68(C), pages 102-115.
    11. Lockwood, Ben & Philippopoulos, Apostolis & Tzavalis, Elias, 2001. "Fiscal policy and politics: theory and evidence from Greece 1960-1997," Economic Modelling, Elsevier, vol. 18(2), pages 253-268, April.
    12. Zixiong Xie & Shyh-Wei Chen & An-Chi Wu, 2023. "Real interest rate parity in the Pacific Rim countries: new empirical evidence," Empirical Economics, Springer, vol. 64(3), pages 1471-1515, March.
    13. Joseph V. Balagtas & Matthew T. Holt, 2009. "The Commodity Terms of Trade, Unit Roots, and Nonlinear Alternatives: A Smooth Transition Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 87-105.
    14. Tiwari, Aviral & Shahbaz, Muhammad, 2011. "Does Defence Spending Stimulate Economic Growth in India?," MPRA Paper 30880, University Library of Munich, Germany, revised 18 Apr 2011.
    15. Bierens, Herman J., 1997. "Testing the unit root with drift hypothesis against nonlinear trend stationarity, with an application to the US price level and interest rate," Journal of Econometrics, Elsevier, vol. 81(1), pages 29-64, November.
    16. Narayan, Paresh Kumar & Narayan, Seema & Mishra, Sagarika, 2013. "Has the structural break slowed down growth rates of stock markets?," Economic Modelling, Elsevier, vol. 30(C), pages 595-601.
    17. Papell, David H. & Prodan, Ruxandra, 2014. "Long run time series tests of constant steady-state growth," Economic Modelling, Elsevier, vol. 42(C), pages 464-474.
    18. Bernard Njindan Iyke, 2019. "A Test Of The Efficiency Of The Foreign Exchange Market In Indonesia," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 0(12th BMEB), pages 1-26, January.
    19. Kumar Narayan, Paresh & Smyth, Russell, 2007. "Are shocks to energy consumption permanent or temporary? Evidence from 182 countries," Energy Policy, Elsevier, vol. 35(1), pages 333-341, January.
    20. Aviral Tiwari & Muhammad Shahbaz, 2014. "Revisiting Purchasing Power Parity for India using threshold cointegration and nonlinear unit root test," Economic Change and Restructuring, Springer, vol. 47(2), pages 117-133, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:ijsepp:v:34:y:2007:i:3:p:147-158. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.