Temporal Causality between Taxes and Public Expenditures: The Case of South Africa
AbstractThis paper investigates the direction of causal relationship between taxes and expenditure in South Africa, using quarterly data for the period 1960:1-2006:2, and annual data for 1960 to 2005. For both frequencies, gross domestic product and government debt are included in the VAR system as control variables. For quarterly data the Johansen’s (1991, 1995) methodology suggest two cointegrating equations among the four variables. Our findings support the fiscal synchronisation hypothesis, since Granger causality tests in a Vector Error Correction framework suggests bi-directional causality between taxes and expenditure for the period under study. In contrast to the VECM for quarterly data, the VECM for annual data disprove any option of Granger causality between taxes and expenditure. The apparent ambiguity is indication of the fact that causality, among other factors, depends on the frequency of data.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200709.
Length: 20 pages
Date of creation: Jul 2007
Date of revision:
Granger causality; Cointegration; Error correction; Vector error correction model; Vector autoregressive model;
Find related papers by JEL classification:
- C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
This paper has been announced in the following NEP Reports:
- NEP-AFR-2007-11-17 (Africa)
- NEP-ALL-2007-11-17 (All new papers)
- NEP-PBE-2007-11-17 (Public Economics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Samuel S. Jibao & Niek Schoeman & Ruthira Naraidoo, 2011.
"Fiscal regime changes and the sustainability of fiscal imbalance in South Africa; a smooth transition error-correction approach,"
228, Economic Research Southern Africa.
- Samuel S Jibao & Niek Schoeman & Ruthira Naraidoo, 2010. "Fiscal Regime Changes and the Sustainability of Fiscal Imbalance in South Africa: A Smooth Transition Error-Correction Approach," Working Papers 201023, University of Pretoria, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rangan Gupta).
If references are entirely missing, you can add them using this form.