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The Causal Relationship Between Government Revenue and Expenditure in Namibia

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Author Info
Eita, Joel Hinaunye
Mbazima, Daisy

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Abstract

The relationship between government revenue and government expenditure is important, given its relevance for policy especially with respect to the budget deficit. The purpose of this paper is to investigate the relationship between government revenue and government expenditure in Namibia. It investigates the causal relationship between government revenue and government expenditure using Granger causality test through cointegrated vector autoregression (VAR) methods for the period the period 1977 to 2007. The paper tests whether government revenue causes government expenditure or whether the causality runs from government expenditure to government revenue, and if there is bi-directional causality. The results show that there is unidirectional causality from government revenue to government expenditure. This suggests unsustainable fiscal imbalances (deficit) can be mitigated by policies that stimulate government revenue.

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File URL: http://mpra.ub.uni-muenchen.de/9154/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9154.

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Date of creation: 26 May 2008
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Handle: RePEc:pra:mprapa:9154

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Related research
Keywords: government expenditure government revenue causality cointegration test revenue-spend spend-revenue fiscal synchronisation Namibia

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models
C5 - Mathematical and Quantitative Methods - - Econometric Modeling
H0 - Public Economics - - General
C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
H5 - Public Economics - - National Government Expenditures and Related Policies
H2 - Public Economics - - Taxation, Subsidies, and Revenue

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  1. Shan, Jordan & Tian, Gary Gang, 1998. "Causality between Exports and Economic Growth: The Empirical Evidence from Shanghai," Australian Economic Papers, Blackwell Publishing, vol. 37(2), pages 195-202, June. [Downloadable!] (restricted)
  2. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250. [Downloadable!] (restricted)
  3. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January. [Downloadable!] (restricted)
  4. Paresh Kumar Narayan & Seema Narayan, 2006. "Government revenue and government expenditure nexus: evidence from developing countries," Applied Economics, Taylor and Francis Journals, vol. 38(3), pages 285-291, February. [Downloadable!] (restricted)
  5. Ugo Fasano-Filho & Qing Wang, 2002. "Testing the Relationship between Government Spending and Revenue: Evidence from GCC Countries," IMF Working Papers 02/201, International Monetary Fund. [Downloadable!]
  6. Zapata, Hector O & Rambaldi, Alicia N, 1997. "Monte Carlo Evidence on Cointegration and Causation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(2), pages 285-98, May.
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  7. Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May. [Downloadable!] (restricted)
  8. von Furstenberg, George M & Green, R Jeffrey & Jeong, Jin-Ho, 1986. "Tax and Spend, or Spend and Tax?," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 179-88, May. [Downloadable!] (restricted)
  9. Jaleel Ahmad & Somchai Harnhirun, 1996. "Cointegration and Causality between Exports and Economic Growth: Evidence from the ASEAN Countries," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 413-16, April. [Downloadable!] (restricted)
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