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Government Expenditure and National Income: Causality Tests for Twelve New Members of E.E

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  • Chaido Dritsaki

    ()
    (Technological Institute of Western Macedonia)

  • Melina Dritsaki

    ()
    (Brunel University, West London)

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    Abstract

    This study aims to determine the direction of causality between national income and government expenditures for twelve new members of E.E. namely Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Lithuania, Latvia, Malta, Poland, Romania, Slovenia, and Slovakia. Support for the hypothesis that causality runs from government expenditures to national income has been found only in the case of Bulgaria and Cyprus. The results of Granger causality tests indicate that Wagner’s law is supported by the data of countries (Cyprus, Poland, and Romania) in our sample.

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    Bibliographic Info

    Article provided by Department of International Business and Economics from the Academy of Economic Studies Bucharest in its journal Romanian Economic Journal.

    Volume (Year): 13 (2010)
    Issue (Month): 38 (December)
    Pages: 67-89

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    Handle: RePEc:rej:journl:v:13:y:2010:i:38:p:67-89

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    Related research

    Keywords: Government Expenditure; National Income; Twelve New Members of E.E; Unit Root; Cointegration; Causality;

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    1. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
    2. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-44, January.
    3. repec:att:wimass:9220 is not listed on IDEAS
    4. Singh, Balvir & Sahni, Balbir S, 1984. "Causality between Public Expenditure and National Income," The Review of Economics and Statistics, MIT Press, vol. 66(4), pages 630-44, November.
    5. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    6. John Loizides & George Vamvoukas, 2005. "Government expenditure and economic growth: Evidence from trivariate causality testing," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 125-152, May.
    7. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    8. James G. MacKinnon, 1995. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Working Papers 918, Queen's University, Department of Economics.
    9. Kenneth D. West & Whitney K. Newey, 1995. "Automatic Lag Selection in Covariance Matrix Estimation," NBER Technical Working Papers 0144, National Bureau of Economic Research, Inc.
    10. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
    11. Chor Foon Tang, 2009. "An Examination of the Government Spending and Economic Growth Nexus for Malaysia Using the Leveraged Bootstrap Simulation Approach," Global Economic Review, Taylor & Francis Journals, vol. 38(2), pages 215-227.
    12. M. I. Ansari & D. V. Gordon & C. Akuamoah, 1997. "Keynes versus Wagner: public expenditure and national income for three African countries," Applied Economics, Taylor & Francis Journals, vol. 29(4), pages 543-550.
    13. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
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