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Government revenue, government expenditure, and temporal causality: evidence from China

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  • Xiaoming Li
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    Abstract

    Dissatisfied with little evidence provided on various hypotheses concerning the revenue-expenditure relation in China, this paper is an empirical endeavour to fill the gap through a battery of econometric tests for causality based on vector error correction and vector autoregression models. A more comprehensive testing strategy for unit roots and cointegration has been suggested, and a bidirectional causality pattern has been found in China's government finance. The paper thus concludes that attempts simply to change revenue or expenditure or both without taking into account of the interdependence between the two may be counter-productive, and the effects on aggregate demand of government debt-financing in the presence of inflation may not be as detrimental as some economists would expect.

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    Bibliographic Info

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

    Volume (Year): 33 (2001)
    Issue (Month): 4 ()
    Pages: 485-497

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    Handle: RePEc:taf:applec:v:33:y:2001:i:4:p:485-497

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    Cited by:
    1. 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.
    2. 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.
    3. 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.
    4. Yuan-Hong Ho & Chiung-Ju Huang, 2009. "Tax-Spend, Spend-Tax, or Fiscal Synchronization: A Panel Analysis of the Chinese Provincial Real Data," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 5(2), pages 257-272, July.
    5. 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.
    6. HYE, Qazi Muhammad Adnan & M Anwar, Jalil, 2010. "Revenue and Expenditure Nexus: A Case Study of Romania," MPRA Paper 32132, University Library of Munich, Germany.
    7. Yashobanta, Yashobanta Parida & smruti, Smruti Ranjan Behera, 2012. "Causal Link between Central Government Revenue and Expenditure: Evidence for India," MPRA Paper 43072, University Library of Munich, Germany.

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