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Assessment of Budget Sustainability in Sarawak

Author

Listed:
  • Chin-Hong Puah

    (Faculty of Economics and Business, Universiti Malaysia Sarawak)

  • Evan Lau

    (Faculty of Economics and Business, Universiti Malaysia Sarawak)

  • Hui-Fern Teo

    (Faculty of Economics and Business, Universiti Malaysia Sarawak)

Abstract

This study reexamines the sustainability of budget stance of Sarawak state, 1970-2008. Using the intertemporal borrowing constraint as a framework, the study tests the long-run relationship between government revenue and expenditure. Empirical results demonstrate a long-run equilibrium relationship among the variables. The cointegration test result suggests that Sarawak state’s fiscal stance satisfies the weak sustainability condition. In addition, the Granger causality test result reveals a bi-directional relationship between government revenue and expenditure. This means that fiscal authorities made simultaneous decisions on expenditure and revenue. Government revenue and expenditure will mutually reinforce each other.

Suggested Citation

  • Chin-Hong Puah & Evan Lau & Hui-Fern Teo, 2012. "Assessment of Budget Sustainability in Sarawak," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(8), pages 952-965, December.
  • Handle: RePEc:asi:aeafrj:2012:p:952-965
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