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Asymmetric modelling of the revenue-expenditure nexus: evidence from aggregate state and local government in the US

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  • Matthew Zapf
  • James Payne

Abstract

This study examines the time series dynamics between US aggregate state and local government receipts and expenditures in differentiating between four hypotheses related to the revenue-expenditure nexus: tax-spend, spend-tax, fiscal synchronization and institutional separation hypotheses. Unlike previous research at the state and local level, the possibility of asymmetries in the budgetary process is explored using the threshold autoregressive (TAR) and momentum threshold autoregressive (MTAR) cointegration framework of Enders and Siklos (2001). The results indicate the absence of any asymmetries (TAR or MTAR) in the adjustment towards budgetary equilibrium. The symmetric error correction model provides support for the spend-tax hypothesis.

Suggested Citation

  • Matthew Zapf & James Payne, 2009. "Asymmetric modelling of the revenue-expenditure nexus: evidence from aggregate state and local government in the US," Applied Economics Letters, Taylor & Francis Journals, vol. 16(9), pages 871-876.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:9:p:871-876
    DOI: 10.1080/13504850701222095
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    Cited by:

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    2. HYE, Qazi Muhammad Adnan & M Anwar, Jalil, 2010. "Revenue and Expenditure Nexus: A Case Study of Romania," MPRA Paper 32132, University Library of Munich, Germany.
    3. Saunoris, James W. & Payne, James E., 2010. "Tax more or spend less? Asymmetries in the UK revenue-expenditure nexus," Journal of Policy Modeling, Elsevier, vol. 32(4), pages 478-487, July.
    4. Temel Gurdal & Mucahit Aydin & Veysel Inal, 2021. "The relationship between tax revenue, government expenditure, and economic growth in G7 countries: new evidence from time and frequency domain approaches," Economic Change and Restructuring, Springer, vol. 54(2), pages 305-337, May.
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    6. Phiri, Andrew, 2018. "How sustainable are fiscal budgets in the Kingdom of Swaziland?," MPRA Paper 85149, University Library of Munich, Germany.
    7. Teresa Famulska & Jan Kaczmarzyk & Malgorzata Grzaba, 2020. "The Relationship Between Tax Revenue and Public Social Expenditure in the EU Member States," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 1136-1156.
    8. 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.
    9. George A. Vamvoukas, 2011. "Panel Data Modeling and the Tax-Spend Controversy in the Euro Zone," Post-Print hal-00716629, HAL.
    10. Krasnopeeva, Natalia, 2023. "Revenues and expenditures of Russian regional budgets: Granger causality analysis," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 70, pages 5-33.
    11. Kollias, Christos & Papadamou, Stephanos & Psarianos, Iacovos, 2014. "Fiscal imbalances and asymmetric adjustment under Labour and Conservative governments in the UK," Research in Economics, Elsevier, vol. 68(3), pages 208-213.
    12. Taner TURAN & Mesut KARAKAŞ, 2018. "The Relationship between Government Spending and Revenue: Nonlinear Bounds Testing Approach (NARDL)," Sosyoekonomi Journal, Sosyoekonomi Society.
    13. Ntokozo Patrick Nzimande & Harold Ngalawa, 2022. "Tax-Spend or Spend-Tax? The Case of Southern Africa," Economies, MDPI, vol. 10(4), pages 1-10, April.
    14. Dervis Kirikkaleli & Bugra Ozbeser, 2023. "Government Expenditures and Tax Revenues in the United States of America," SAGE Open, , vol. 13(1), pages 21582440231, March.
    15. Ahmad Zubaidi Baharumshah & Aliyu Alhaji Jibrilla & Abdalla Sirag & Hamisu Sadi Ali & Ibrahim Muye Muhammad, 2016. "Public Revenue-Expenditure Nexus in South Africa: Are there Asymmetries?," South African Journal of Economics, Economic Society of South Africa, vol. 84(4), pages 520-537, December.
    16. George A Vamvoukas, 2012. "Panel data modelling and the tax-spend controversy in the euro zone," Applied Economics, Taylor & Francis Journals, vol. 44(31), pages 4073-4085, November.
    17. Oyeyinka OMOSHORO-JONES, 2020. "Investigating The Government Revenue–Expenditure Nexus: Empirical Evidence For The Free State Province In A Multivariate Model," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 11(2), pages 138-156.
    18. Oluwole Owoye & Olugbenga A. Onafowora, 2011. "The Relationship between Tax Revenues and Government Expenditures in European Union and Non-European Union OECD Countries," Public Finance Review, , vol. 39(3), pages 429-461, May.
    19. Olumuyiwa Ganiyu Yinusa & Olalekan Bashir Aworinde & Isiaq Olasunkanmi Oseni, 2017. "The Revenue-Expenditure Nexus in Nigeria: Assymetric Cointegration Approach," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 15(1), pages 47-61.

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