The Intertemporal Relation Between Government Revenue and Expenditure in the United Kingdom, 1750-2004
AbstractWe examine the intertemporal relation between government revenue and expenditure in the UK during 1750–2004. We pay particular attention to long-run trends by applying a battery of unit root and cointegration techniques to the data, and we use a modified Granger-causality test on data spans organized around structural breaks in the series. The results suggest that, allowing for structural breaks, UK real revenue and spending are I(1) series and cointegrated and that Granger-causality runs from government spending to revenue. As such, the ‘spend-tax’ hypothesis appears to best characterize the long-run intertemporal relation between government revenue and spending in the UK.
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Bibliographic InfoPaper provided by Bangor Business School, Prifysgol Bangor University (Cymru / Wales) in its series Working Papers with number 10007.
Length: 28 pages
Date of creation: Mar 2010
Date of revision:
Government revenue and expenditure; Unit roots; Cointegration; Causality; Structural breaks;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
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