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On the Causal Relationship between Government Expenditures and National Income

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Author Info
Holmes, James M
Hutton, Patricia A
Abstract

A research strategy is suggested that separates the issue of inference from the problems of prediction or of quantitative policy analysis of an empirical parametric model and illustrates a new methodology that enables this in a test for prima facie causality. Unlike the conventional parametric test, the more powerful multiple rank F test is invariant to monotonic transformations of the variables and independent of the error distribution. Employing this test, the Wagnerian hypothesis, supported by conventional parametric analysis, is rejected and the conventional Keynesian theory is accepted. Copyright 1990 by MIT Press.

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Publisher Info
Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 72 (1990)
Issue (Month): 1 (February)
Pages: 87-95
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Handle: RePEc:tpr:restat:v:72:y:1990:i:1:p:87-95

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  1. Fölster, Stefan & Henrekson, Magnus, 1997. "Growth and the Public Sector: A Critique of the Critics," Working Paper Series 492, Research Institute of Industrial Economics, revised 10 Jun 1998. [Downloadable!]
    Other versions:
  2. Paresh Kumar Narayan & Ingrid Nielsen & Russell Smyth, 2006. "Panel Data, Cointegration, Causality And Wagner'S Law: Empirical Evidence From Chinese Provinces," Monash Economics Working Papers 01/06, Monash University, Department of Economics. [Downloadable!]
    Other versions:
  3. Muthi Samudram & Mahendhiran Nair & Santha Vaithilingam, 2009. "Keynes and Wagner on government expenditures and economic development: the case of a developing economy," Empirical Economics, Springer, vol. 36(3), pages 697-712, June. [Downloadable!] (restricted)
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