An Investigation of the Public Deficits and Government Spending Relationship: Evidence for Greece
This paper tests the validity of the Buchanan-Wagner hypothesis for Greece, that increases in public spending are the result of the tolerance of large deficits over the period 1961-1994. To test this hypothesis, three unit-root pretests, the Dickey-Fuller, Phillips-Perron and Kwiatkowski et al. and maximum likelihood estimation techniques of cointegrating vectors and a vector error-correction model are employed. A long-run relationship is found to exist among government spending, deficit, income, wages and adult population and the importance of short-run deviations are presented. The empirical evidence suggests that Buchanan and Wagner hypothesis, seems to find support for Greece in the long-run and the short-run. Further, productivity in the public sector is lower than in the private sector and the growth of income is not an important determinant of the increase in the relative size of public spending. Copyright 2001 by Kluwer Academic Publishers
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992.
"Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?,"
Journal of Econometrics,
Elsevier, vol. 54(1-3), pages 159-178.
- Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
- Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
- Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
- Ashworth, John, 1995. "The Empirical Relationship between Budgetary Deficits and Government Expenditure Growth: An Examination Using Cointegration," Public Finance = Finances publiques, , vol. 50(1), pages 1-18.
- Peter C.B. Phillips, 1985.
"Time Series Regression with a Unit Root,"
Cowles Foundation Discussion Papers
740R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1986.
- Hondroyiannis, George & Papapetrou, Evangelia, 1995. "An Examination of Wagner's Law for Greece: A Cointegration Analysis," Public Finance = Finances publiques, , vol. 50(1), pages 67-79.
- George Tridimas, 1992. "Budgetary Deficits and Government Expenditure Growth: Toward a More Accurate Empirical Specification," Public Finance Review, , vol. 20(3), pages 275-297, July.
- Provopoulos, George A, 1982. "Public Spending and Deficits: The Greek Experience," Public Finance = Finances publiques, , vol. 37(3), pages 422-27.
- Choi, In, 1992. "Effects of data aggregation on the power of tests for a unit root : A simulation study," Economics Letters, Elsevier, vol. 40(4), pages 397-401, December.
- Schwert, G. William, 1987. "Effects of model specification on tests for unit roots in macroeconomic data," Journal of Monetary Economics, Elsevier, vol. 20(1), pages 73-103, July.
- Perron, P., 1986.
"Trends and Random Walks in Macroeconomic Time Series: Further Evidence From a New Approach,"
Cahiers de recherche
8650, Universite de Montreal, Departement de sciences economiques.
- Perron, Pierre, 1988. "Trends and random walks in macroeconomic time series : Further evidence from a new approach," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 297-332.
- Nouriel Roubini & Jeffrey Sachs, 1989. "Government Spending and Budget Deficits in the Industrial Economies," NBER Working Papers 2919, National Bureau of Economic Research, Inc.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
- Khan, Ashfaque H, 1988. "Public Spending and Deficits: Evidence from a Developing Economy," Public Finance = Finances publiques, , vol. 43(3), pages 396-402.
- Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-28, August.
- Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
When requesting a correction, please mention this item's handle: RePEc:kap:pubcho:v:107:y:2001:i:1-2:p:169-82. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.