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Causal Link between Central Government Revenue and Expenditure: Evidence for India

Author

Listed:
  • Yashobanta Parida

    (INSTITUTE OF ECONOMIC GROWTH)

Abstract

This paper attempts to analyze the causal relationship between central government revenue and expenditure for India using annual data over the period 1970-2010. The Johansen cointegration test suggests that there is a long-run relationship among the variables. The result from Granger causality test based on Vector Error Correction Models (VECM) suggests unidirectional causality from expenditure to revenue in the long-run supporting Spend-and-Tax hypothesis. The short-run Granger causality test based on WALD test restriction suggests that there is no causal relationship between the variables.

Suggested Citation

  • Yashobanta Parida, 2012. "Causal Link between Central Government Revenue and Expenditure: Evidence for India," Economics Bulletin, AccessEcon, vol. 32(4), pages 2808-2816.
    • Handle: RePEc:ebl:ecbull:eb-12-00493
    as

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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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