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Government Expenditures and Revenues: Evidence from Asymmetric Modeling

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Author Info

  • Bradley T. Ewing

    ()
    (Texas Tech University)

  • James E. Payne

    ()
    (Department of Economics, Illinois State University)

  • Mark A. Thompson

    ()
    (Institute for Economic Advancement, University of Arkansas at Little Rock)

  • Omar M. Al-Zoubi

    ()
    (Department of Economics, Texas Tech University)

Abstract

In this article, we examine the relationship between U.S. federal revenues and expenditures while relaxing the assumption of a symmetric adjustment process underlying the conventional cointegration and error correction model. Threshold autoregression and momentum threshold autoregression models are used to ascertain the empirical link between the two variables of the budgetary process. Our results suggest that revenues and expenditures are cointegrated and that the adjustment process of the budgetary disequilibrium is asymmetric. The application of the asymmetric error correction model indicates that revenues and expenditures respond to the long-run requirements of the budgetary balance only when the budget is worsening.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 73 (2006)
Issue (Month): 1 (July)
Pages: 190–200

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Handle: RePEc:sej:ancoec:v:73:1:y:2006:p:190-200

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Web page: http://www.southerneconomic.org/
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Cited by:
  1. Saunoris, James W. & Payne, James E., 2010. "Tax more or spend less? Asymmetries in the UK revenue-expenditure nexus," Journal of Policy Modeling, Elsevier, vol. 32(4), pages 478-487, July.
  2. Olalekan Bashir Aworinde, 2013. "The tax-spend nexus in Nigeria: Evidence from Nonlinear Causality," Economics Bulletin, AccessEcon, vol. 33(4), pages 3117-3130.
  3. 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.
  4. Kausik Chaudhuri & Bodhisattva Sengupta, 2009. "Revenue-Expenditure Nexus For Southern States : Some Policy Oriented Econometric Observations," Governance Working Papers 22937, East Asian Bureau of Economic Research.
  5. Luis Gil-Alana, 2009. "Government Expenditures and Revenues: Evidence of Fractional Cointegration in an Asymmetric Modeling," International Advances in Economic Research, Springer, vol. 15(2), pages 143-155, May.
  6. Magazzino, Cosimo, 2010. "Public expenditure and revenue in Italy, 1862-1993," MPRA Paper 27308, University Library of Munich, Germany.
  7. Kausik Chaudhuri & Bodhisattva Sengupta, 2009. "Revenue-Expenditure Nexus for Southern States: Some Policy Oriented Econometric Observations," Working Papers 2009-048, Madras School of Economics,Chennai,India.
  8. repec:asi:ajoerj:2013:p:420-432 is not listed on IDEAS
  9. Andrew T. Young, 2010. "Do US Federal Revenues and Expenditures Respond Asymmetrically to Budgetary Disequilibria?," Working Papers 10-02, Department of Economics, West Virginia University.
  10. James Payne & Hassan Mohammadi, 2006. "Are Adjustments in the U.S. Budget Deficit Asymmetric? Another Look at Sustainability," Atlantic Economic Journal, International Atlantic Economic Society, vol. 34(1), pages 15-22, March.

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