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The causal relationship between taxes and expenditures in the G7 countries: cointegration and error-correction models

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  • Oluwole Owoye
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    Abstract

    The paper examines the causal relationship between tax revenues and expenditures in the G7 countries using cointegration and error-correction methodology. This statistical technique provides additional channels through which causality could emerge. The empirical results show that bidirectional causality exists between government taxes and expenditures in all countries except in Japan and Italy. For Japan and Italy, causality runs from government taxes to expenditures.

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    File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/135048595357744&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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    Bibliographic Info

    Article provided by Taylor and Francis Journals in its journal Applied Economics Letters.

    Volume (Year): 2 (1995)
    Issue (Month): 1 ()
    Pages: 19-22

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    Handle: RePEc:taf:apeclt:v:2:y:1995:i:1:p:19-22

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    Cited by:
    1. M. Haider Hussain, 2004. "On the Causal Relationship between Government Expenditure and Tax Revenue in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 9(2), pages 105-117, Jul-Dec.
    2. Josheski, Dushko & Koteski, Cane, 2011. "The causal relationship between patent growth and growth of GDP with quarterly data in the G7 countries: cointegration, ARDL and error correction models," MPRA Paper 33153, University Library of Munich, Germany.
    3. António Afonso, 2005. "Fiscal Sustainability: The Unpleasant European Case," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(1), pages 19-, March.
    4. Yaya Keho, 2010. "Spending Cuts or Tax Adjustments: How Can UEMOA Countries Control Their Budget Deficits?," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 9(3), pages 233-252, December.
    5. Periklis Gogas & Ioannis Pragidis, 2013. "Asymmetric Fiscal Policy Shocks," Working Paper Series 07_13, The Rimini Centre for Economic Analysis.
    6. 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.
    7. Garcia, Sophie & Henin, Pierre-Yves, 1999. "Balancing budget through tax increases or expenditure cuts: is it neutral?," Economic Modelling, Elsevier, vol. 16(4), pages 591-612, December.
    8. G A Vamvoukas, 2011. "The Tax-Spend Debate with an Application to the EU," Economic Issues Journal Articles, Economic Issues, vol. 16(1), pages 65-88, March.
    9. Hatemi-J, Abdulnasser, 2002. "Fiscal policy in Sweden: effects of EMU criteria convergence," Economic Modelling, Elsevier, vol. 19(1), pages 121-136, January.
    10. Toshihiro Ihori & Takero Doi & Hiroki Kondo, 2000. "Japanese Fiscal Reform: Fiscal Reconstruction and Fiscal Policy," CIRJE F-Series CIRJE-F-83, CIRJE, Faculty of Economics, University of Tokyo.
    11. Benjamin S. Cheng & Ashagre Yigletu, 2000. "Causality Between Taxes and Expenditures in the U.S.: A Multivariate Approach," New York Economic Review, New York State Economics Association (NYSEA), vol. 31(1), pages 15-26.
    12. Bogdan Dima & Oana Lobont & Cristina Nicolescu, 2009. "The Fiscal Revenues And Public Expenditures: Is Their Evolution Sustenable? The Romanian Case," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(11), pages 42.

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