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Asymmetric Relationship Between Government Revenues and Expenditures in a Developing Economy: Evidence from a Non-linear Model

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  • Syed Ali Raza
  • Syed Zaki Hassan
  • Arshian Sharif

Abstract

Understanding the revenue–expenditure nexus is the core essence of this research in the Pakistani context. This research examines the non-linear relationship between government revenues and government expenditures during 1972–2014. The recently developed non-linear co-integration technique has been used along with the symmetry test. The result shows that the revenues and expenditures have co-integration and provide the evidence in favour of fiscal synchronization hypothesis in the budgetary process. Moreover, the finding also reveals that the relationship between these two fiscal elements is asymmetric and negative changes in revenues and expenditures have a greater impact than the positive ones. Furthermore, another important aspect that was revealed during the study was that the negative shocks in the revenues will lead towards the drastically large increase in the expenditure.

Suggested Citation

  • Syed Ali Raza & Syed Zaki Hassan & Arshian Sharif, 2019. "Asymmetric Relationship Between Government Revenues and Expenditures in a Developing Economy: Evidence from a Non-linear Model," Global Business Review, International Management Institute, vol. 20(5), pages 1179-1195, October.
    • Handle: RePEc:sae:globus:v:20:y:2019:i:5:p:1179-1195
    DOI: 10.1177/0972150919846800
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