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The Causal Relationship Between Government Revenue and Expenditure in Namibia

  • Eita, Joel Hinaunye
  • Mbazima, Daisy

The relationship between government revenue and government expenditure is important, given its relevance for policy especially with respect to the budget deficit. The purpose of this paper is to investigate the relationship between government revenue and government expenditure in Namibia. It investigates the causal relationship between government revenue and government expenditure using Granger causality test through cointegrated vector autoregression (VAR) methods for the period the period 1977 to 2007. The paper tests whether government revenue causes government expenditure or whether the causality runs from government expenditure to government revenue, and if there is bi-directional causality. The results show that there is unidirectional causality from government revenue to government expenditure. This suggests unsustainable fiscal imbalances (deficit) can be mitigated by policies that stimulate government revenue.

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File URL: http://mpra.ub.uni-muenchen.de/9154/1/MPRA_paper_9154.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9154.

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Date of creation: 26 May 2008
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Handle: RePEc:pra:mprapa:9154
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  2. Neelesh Gounder & Paresh Kumar Narayan & Arti Prasad, 2007. "An empirical investigation of the relationship between government revenue and expenditure: The case of the Fiji Islands," International Journal of Social Economics, Emerald Group Publishing, vol. 34(3), pages 147-158, March.
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  15. 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.
  16. Qing Wang & Ugo Fasano-Filho, 2002. "Testing the Relationship Between Government Spending and Revenue: Evidence From GCC Countries," IMF Working Papers 02/201, International Monetary Fund.
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