IDEAS home Printed from https://ideas.repec.org/a/tei/journl/v5y2012i1p129-145.html
   My bibliography  Save this article

The Causality between Government Revenue and Government Expenditure in Iran

Author

Listed:
  • Yousef Elyasi

    (Young Researchers Club, Mahabad Branch, Islamic Azad University, Mahabad, Iran)

  • Mohammad Rahimi

    (Faculty of Economics and Social Science, Bu-Ali Sina University, Hamedan, Iran)

Abstract

The causal relationship between government revenue and government expenditure is an important subject in public economics especially to the control of budget deficit. The purpose of this study is to investigate the relationship between government revenue and government expenditure in Iran by applying the bounds testing approach to cointegration. The results of the causality test show that there is a bidirectional causal relationship between government expenditure and revenues in both long run and short run. Therefore, the results of this paper are consistent with fiscal synchronization hypothesis. The policy implication of results suggests that because of existing interdependence relation between government expenditure and revenue, the government makes its expenditures and revenues decision simultaneously. Under this hypothesis, the fiscal authorities of Iran should try to increase revenues and decrease expenditure simultaneously to control the budget deficits.

Suggested Citation

  • Yousef Elyasi & Mohammad Rahimi, 2012. "The Causality between Government Revenue and Government Expenditure in Iran," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 5(1), pages 129-145, April.
    • Handle: RePEc:tei:journl:v:5:y:2012:i:1:p:129-145
    as

    Download full text from publisher

    File URL: http://ijbesar.teiemt.gr/docs/volume5_issue1/causality_iran.pdf
    Download Restriction: no
    File URL: http://ijbesar.teiemt.gr/volume5_issue1.php
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Payne, James E, 1998. "The Tax-Spend Debate: Time Series Evidence from State Budgets," Public Choice, Springer, vol. 95(3-4), pages 307-320, June.
    2. 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.
    3. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    4. Alan T. Peacock & Jack Wiseman, 1961. "The Growth of Public Expenditure in the United Kingdom," NBER Books, National Bureau of Economic Research, Inc, number peac61-1.
    5. Tsangyao Chang & Gengnan Chiang, 2009. "Revisiting the Government Revenue-Expenditure Nexus: Evidence from 15 OECD Countries Based on the Panel Data Approach," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(2), pages 165-172, June.
    6. António Afonso & Cristophe Rault, 2008. "Bootstrap Panel Granger-Causality Between Government Spending and Revenue," Working Papers Department of Economics 2008/39, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    7. Bassam AbuAl-Foul & Hamid Baghestani, 2004. "The causal relation between government revenue and spending: Evidence from Egypt and Jordan," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 28(2), pages 260-269, June.
    8. Kausik Chaudhuri & Bodhisattva Sengupta, 2009. "Revenue-Expenditure Nexus for Southern States: Some Policy Oriented Econometric Observations," Working Papers 2009-048, Madras School of Economics,Chennai,India.
    9. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    10. 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.
    11. Xiaoming Li, 2001. "Government revenue, government expenditure, and temporal causality: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 33(4), pages 485-497.
    12. Benjamin Cheng, 1999. "Causality between taxes and expenditures: Evidence from Latin American countries," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 23(2), pages 184-192, June.
    13. Ant??nio Afonso & Christophe Rault, 2009. "Bootstrap panel Granger-causality between government spending and revenue in the EU," William Davidson Institute Working Papers Series wp944, William Davidson Institute at the University of Michigan.
    14. von Furstenberg, George M & Green, R Jeffrey & Jeong, Jin-Ho, 1986. "Tax and Spend, or Spend and Tax?," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 179-188, May.
    15. Neelesh Gounder & Paresh Kumar Narayan & Arti Prasad, 2007. "An empirical investigation of the relationship between government revenue and expenditure," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 34(3), pages 147-158, February.
    16. Odhiambo, Nicholas M., 2010. "Energy consumption, prices and economic growth in three SSA countries: A comparative study," Energy Policy, Elsevier, vol. 38(5), pages 2463-2469, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ismail, Abdul Ghafar & Jaafar, Abu Bakar, 2014. "Tax Rate and its Determinations: An Opinion from Ibn Khaldun," Working Papers 1435-1, The Islamic Research and Teaching Institute (IRTI).
    2. A. Phiri, 2019. "Asymmetries in the revenue–expenditure nexus: new evidence from South Africa," Empirical Economics, Springer, vol. 56(5), pages 1515-1547, May.
    3. Ibrahim, Taofik, 2018. "Government expenditure-revenue nexus reconsidered for Nigeria: Does structural break matter?," MPRA Paper 86220, University Library of Munich, Germany, revised 21 Oct 2017.
    4. Adel Shakeeb MOHSEN, 2016. "Effects of oil returns and external debt on the government investment: A case study of Syria," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(606), S), pages 255-262, Spring.
    5. Damian C. NWOSU & Harrison O. OKAFOR, 2014. "Government Revenue and Expenditure in Nigeria: A Disaggregated Analysis," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(7), pages 877-892, July.
    6. Raed A. M. Iriqat & Ahmad N. H. Anabtawi, 2016. "GDP and Tax Revenues-Causality Relationship in Developing Countries: Evidence from Palestine," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(4), pages 54-62, April.
    7. Lien, Nguyen Phuong, 2015. "The impact of institutional quality on tax revenue in developing countries," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 5(10), pages 181-195, October.
    8. 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.
    9. Hambeleleni Iiyambo & Teresia Kaulihowa, 2020. "An assessment of the relationship between public debt, government expenditure and revenue in Namibia," Public Sector Economics, Institute of Public Finance, vol. 44(3), pages 331-353.
    10. Khatibu Kazungu, 2019. "The Nexus between Government Expenditure and Revenue in Tanzania," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 7(4), pages 158-170, December.
    11. 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.
    12. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Takumah, Wisdom, 2014. "The Dynamic Causal Relationship between Government Revenue and Government Expenditure Nexus in Ghana," MPRA Paper 58579, University Library of Munich, Germany.
    2. A. Phiri, 2019. "Asymmetries in the revenue–expenditure nexus: new evidence from South Africa," Empirical Economics, Springer, vol. 56(5), pages 1515-1547, May.
    3. 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.
    4. 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.
    5. Emre BULUT & Dilek ÇİL, 2024. "Asymmetric Causality Relationship Between Public Expenditures and Tax Revenues: Transition Economies Case," Sosyoekonomi Journal, Sosyoekonomi Society, issue 32(60).
    6. 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.
    7. Yaya Keho, 2010. "Spending Cuts or Tax Adjustments: How Can UEMOA Countries Control Their Budget Deficits?," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 9(3), pages 233-252, December.
    8. 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.
    9. Aliyu Alhaji Jibrilla, 2016. "Fiscal sustainability in the presence of structural breaks: Does overconfidence on resource exports hurt government’s ability to finance debt? Evidence from Nigeria," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1170317-117, December.
    10. Arvin, Mak B. & Pradhan, Rudra P. & Nair, Mahendhiran S., 2021. "Are there links between institutional quality, government expenditure, tax revenue and economic growth? Evidence from low-income and lower middle-income countries," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 468-489.
    11. 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.
    12. Eita, Joel Hinaunye & Mbazima, Daisy, 2008. "The Causal Relationship Between Government Revenue and Expenditure in Namibia," MPRA Paper 9154, University Library of Munich, Germany.
    13. Mihai Mutascu, 2015. "Government revenues and expenditures in the EU ex-communist countries: a bootstrap panel Granger causality approach," Working Papers halshs-01109233, HAL.
    14. 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.
    15. Fuad M.M Kreishan & Mohamed Sayed Abou Elseoud & Mohammad Selim, 2018. "Oil Revenue and State Budget Dynamic Relationship: Evidence from Bahrain," International Journal of Energy Economics and Policy, Econjournals, vol. 8(6), pages 174-179.
    16. Neha Rajput & G. S. Bhalla, 2024. "Testing the Relationship Between Income and Expenditure of a Statutory Organization: Cointegration and Causality Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 4338-4355, March.
    17. George A. Vamvoukas, 2011. "Panel Data Modeling and the Tax-Spend Controversy in the Euro Zone," Post-Print hal-00716629, HAL.
    18. Magazzino, Cosimo, 2010. "Public expenditure and revenue in Italy, 1862-1993," MPRA Paper 27308, University Library of Munich, Germany.
    19. Taner TURAN & Mesut KARAKAŞ, 2018. "The Relationship between Government Spending and Revenue: Nonlinear Bounds Testing Approach (NARDL)," Sosyoekonomi Journal, Sosyoekonomi Society.
    20. 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.

    More about this item

    Keywords

    Government revenue/expenditure; Bounds testing approach; Granger Causality; ARDL;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tei:journl:v:5:y:2012:i:1:p:129-145. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kostas Stergidis (email available below). General contact details of provider: https://edirc.repec.org/data/dbikagr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.