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Government revenue, government expenditure, and temporal causality: evidence from China

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  • Xiaoming Li

Abstract

Dissatisfied with little evidence provided on various hypotheses concerning the revenue-expenditure relation in China, this paper is an empirical endeavour to fill the gap through a battery of econometric tests for causality based on vector error correction and vector autoregression models. A more comprehensive testing strategy for unit roots and cointegration has been suggested, and a bidirectional causality pattern has been found in China's government finance. The paper thus concludes that attempts simply to change revenue or expenditure or both without taking into account of the interdependence between the two may be counter-productive, and the effects on aggregate demand of government debt-financing in the presence of inflation may not be as detrimental as some economists would expect.

Suggested Citation

  • Xiaoming Li, 2001. "Government revenue, government expenditure, and temporal causality: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 33(4), pages 485-497.
  • Handle: RePEc:taf:applec:v:33:y:2001:i:4:p:485-497
    DOI: 10.1080/00036840122982
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    Citations

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    Cited by:

    1. 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.
    2. Dizaji, Sajjad Faraji, 2014. "The effects of oil shocks on government expenditures and government revenues nexus (with an application to Iran's sanctions)," Economic Modelling, Elsevier, vol. 40(C), pages 299-313.
    3. Phiri, Andrew, 2018. "Fiscal sustainability in BRICS countries: Evidence from asymmetric unit root tests augmented with Fourier fucntion," MPRA Paper 85501, University Library of Munich, Germany.
    4. Yuan-Hong Ho & Chiung-Ju Huang, 2009. "Tax-Spend, Spend-Tax, or Fiscal Synchronization: A Panel Analysis of the Chinese Provincial Real Data," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 5(2), pages 257-272, July.
    5. 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.
    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. Phiri, Andrew, 2016. "Asymmetries in the revenue-expenditure nexus: New evidence from South Africa," MPRA Paper 75224, University Library of Munich, Germany.
    8. 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.
    9. George A. Vamvoukas, 2011. "Panel Data Modeling and the Tax-Spend Controversy in the Euro Zone," Post-Print hal-00716629, HAL.
    10. Takumah, Wisdom, 2014. "The Dynamic Causal Relationship between Government Revenue and Government Expenditure Nexus in Ghana," MPRA Paper 58579, University Library of Munich, Germany.
    11. Andrew Phiri, 2018. "Fiscal sustainability in BRICS countries: Evidence from asymmetric unit root test augmented with Fourier function," Working Papers 1814, Department of Economics, Nelson Mandela University, revised Mar 2018.
    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. Obeng, Samuel, 2015. "A Causality Test of the Revenue-Expenditure Nexus in Ghana," MPRA Paper 63735, University Library of Munich, Germany, revised 25 Feb 2015.
    14. Fazal Husain & Muhammad Ali Qasim & Mahmood Khalid, 2010. "The Relationship between Federal Government Revenues and Expenditures in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 641-649.

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