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An Examination of the Causal Relationship between Government Spending and Revenue: A Cointegration Analysis

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  • Hondroyiannis, George
  • Papapetrou, Evangelia

Abstract

This paper tests the validity of the proposition that there is a causal relationship between government expenditure and government revenue for Greece over the period 1957-93. The empirical analysis employs tests of cointegration as pretests for Granger tests of causality. The empirical evidence suggests that there is a long-run relationship between government spending and government revenue and expenditures cause revenues. Copyright 1996 by Kluwer Academic Publishers

Suggested Citation

  • Hondroyiannis, George & Papapetrou, Evangelia, 1996. "An Examination of the Causal Relationship between Government Spending and Revenue: A Cointegration Analysis," Public Choice, Springer, vol. 89(3-4), pages 363-374, December.
  • Handle: RePEc:kap:pubcho:v:89:y:1996:i:3-4:p:363-74
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    1. repec:rjr:romjef:v::y:2017:i:1:p:116-127 is not listed on IDEAS
    2. repec:asi:ajoerj:2013:p:420-432 is not listed on IDEAS
    3. Panagiotis T. Konstantinou, 2004. "Balancing The Budget Through Revenue Or Spending Adjustments? The Case Of Greece," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 29(2), pages 81-105, December.
    4. Athanasios Athanasenas & Constantinos Katrakilidis & Emmanouil Trachanas, 2014. "Government spending and revenues in the Greek economy: evidence from nonlinear cointegration," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(2), pages 365-376, May.
    5. Magazzino, Cosimo, 2010. "Public expenditure and revenue in Italy, 1862-1993," MPRA Paper 27308, University Library of Munich, Germany.
    6. Yashobanta, Yashobanta Parida & smruti, Smruti Ranjan Behera, 2012. "Causal Link between Central Government Revenue and Expenditure: Evidence for India," MPRA Paper 43072, University Library of Munich, Germany.
    7. Hasan, Syed Akif & Subhani, Muhammad Imtiaz & Osman, Ms. Amber, 2012. "Fiscal Deficit cannot be reduced by increasing Taxes (A point to ponder from Pakistan)," MPRA Paper 35681, University Library of Munich, Germany.
    8. Nemanja Lojanica, 2015. "Government Expenditure and Government Revenue: The Causality on the Example of the Republic of Serbia," MIC 2015: Managing Sustainable Growth; Proceedings of the Joint International Conference, Portorož, Slovenia, 28–30 May 2015, University of Primorska, Faculty of Management Koper.
    9. Yaya Keho, 2010. "Spending Cuts or Tax Adjustments: How Can UEMOA Countries Control Their Budget Deficits?," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 9(3), pages 233-252, December.
    10. Moisio, Antti, 2000. "Spend and Tax or Tax and Spend? Panel Data Evidence from Finnish Municipalities during 1985 - 1999," Discussion Papers 242, VATT Institute for Economic Research.
    11. Hasan, Syed Akif & Subhani, Muhammad Imtiaz & Osman, Ms. Amber, 2011. "An investigation of granger causality between tax revenues and government expenditures," MPRA Paper 35686, University Library of Munich, Germany.
    12. Narayan, Paresh Kumar, 2005. "The government revenue and government expenditure nexus: empirical evidence from nine Asian countries," Journal of Asian Economics, Elsevier, vol. 15(6), pages 1203-1216, January.
    13. Paleologou, Suzanna-Maria, 2013. "Asymmetries in the revenue–expenditure nexus: A tale of three countries," Economic Modelling, Elsevier, vol. 30(C), pages 52-60.
    14. Trachanas, Emmanouil & Katrakilidis, Constantinos, 2013. "Fiscal deficits under financial pressure and insolvency: Evidence for Italy, Greece and Spain," Journal of Policy Modeling, Elsevier, vol. 35(5), pages 730-749.
    15. Benjamin S. Cheng & Ashagre Yigletu, 2000. "Causality Between Taxes and Expenditures in the U.S.: A Multivariate Approach," New York Economic Review, New York State Economics Association (NYSEA), pages 15-26.
    16. Paresh Kumar Narayan & Seema Narayan, 2006. "Government revenue and government expenditure nexus: evidence from developing countries," Applied Economics, Taylor & Francis Journals, vol. 38(3), pages 285-291.
    17. GHARTEY, Edward E., 2010. "Government Expenditures And Revenues Causation: Some Caribbean Empirical Evidence," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(2).

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