Causal Link between Central Government Revenue and Expenditure: Evidence for India
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.
Volume (Year): 32 (2012)
Issue (Month): 4 ()
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- Ananda Jayawickrama & Tilak Abeysinghe, 2006.
"Sustainability Of Fiscal Deficits: The U.S. Experience 1929-2004,"
SCAPE Policy Research Working Paper Series
05xx, National University of Singapore, Department of Economics, SCAPE.
- Ananda Jayawickrama & Tilak Abeysinghe, 2006. "Sustainability of Fiscal Deficits : The US Experience 1929-2004," Governance Working Papers 21924, East Asian Bureau of Economic Research.
- Baffes, John & Shah, Anwar, 1994. "Causality and comovement between taxes and expenditures: Historical evidence from Argentina, Brazil, and Mexico," Journal of Development Economics, Elsevier, vol. 44(2), pages 311-331, August.
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