scholarly journals Budget Balance through Revenue or Spending Adjustment: Evidence from Pakistan

2010 ◽  
Vol 49 (4II) ◽  
pp. 611-630 ◽  
Author(s):  
Nadeem Iqbal ◽  
Wasim Shahid Malik
Keyword(s):  
Government Spending ◽  
Budget Deficit ◽  
Budget Constraint ◽  
Government Expenditures ◽  
Budget Balance ◽  
Debt Sustainability ◽  
Long Run ◽  
The Future ◽  
Tax Hypothesis

Government cannot roll over the debt forever (ponzi game is not allowed). In the long run, inter-temporal budget constraint has to be satisfied, which is possible either through government spending adjustment or increasing government revenues. So current budget deficit calls for adjustment, in the future, in spending or revenues. There are four hypotheses, in the literature, in this regard: the tax-and-spending hypothesis, the spending-and-tax hypothesis, bi-directional causality between government revenues and government expenditures, and independence of taxes and expenditures hypothesis. The last hypothesis, however, have negative implications, in the long run, in terms of debt sustainability and inflation

scholarly journals A Granger Causal Analysis of Tax-Spend Hypothesis: Evidence from Malaysia

2021 ◽  
Vol 124 ◽  
pp. 04002
Author(s):  
Hanana Khan ◽  
Maran Marimuthu ◽  
Fong-Woon Lai
Keyword(s):  
Unit Root ◽  
Budget Deficit ◽  
Time Series Data ◽  
Financial Burden ◽  
Causal Analysis ◽  
Government Expenditures ◽  
Series Data ◽  
Causality Analysis ◽  
Long Run ◽  
Short Run

In economics, the investigation of the association between government revenues (GR) and government expenditures (GE) remains an essential discussion because of its vital role in policy implication concerning the Budget deficit. This paper aims to conduct a causal analysis of these two fiscal variables (government revenue and expenditure) using financial time-series data covering the period from 1990 to 2019 of Malaysia. The analyses used the unit root, Johanson Cointegration, and the Vector Error Correction Model (VECM). Unit root test proposed tested variables are integrated at a level first. Johanson's cointegration test disclosed the fact that long-run relationships exist between the tested variable. Finally, Granger causality analysis reveals a one-way relation between government revenues and expenditures and this unidirectional association is from revenues to expenditures which indicates that in Malaysia, expenditures are supported by revenues; in other words, the Tax-spend hypothesis is supported. In VECM short-run analysis, government revenues can affect government expenditures significantly and 11% disequilibrium can be corrected in the short-run. In short-run and long-run revenues are supporting expenditures. The study recommends that to avoid a high risk of economic problems like a fiscal illusion, unnecessary financial burden, and inflation policymakers should not be imposing a high tax rate to cut the budget deficit.

Six Essays in Persuasion

2017 ◽  
Author(s):  
Thomas J. Sargent
Keyword(s):  
United States ◽  
Fiscal Policy ◽  
Inflation Rate ◽  
Government Debt ◽  
The United States ◽  
Budget Constraint ◽  
Government Expenditures ◽  
The Future ◽  
Monetary And Fiscal Policy ◽  
The U.S

This chapter consists of six essays that use “unpleasant monetarist arithmetic” to interpret events during the 1980s and 1990s in Brazil and the United States. During the 1980s, the United States took steps along a path upon which Brazil had travelled much further, a path along which interest-bearing government debt is growing as a percentage of GNP. The U.S. government was able readily to borrow large amounts, and had far to go before the government's budget constraint threatened to impose painful choices among the options of raising taxes, lowering government expenditures, or printing currency. Brazil found its ability to borrow very limited, and therefore had to confront those painful choices immediately. One essay emphasizes that a country's inflation rate at any moment emerges out of the sustained monetary and fiscal policy that it chooses, now and in the future.

scholarly journals Government Expenditure and Tax Revenue, Causality and Cointegration: The Experience of Pakistan (1972-2007).

2009 ◽  
Vol 48 (4II) ◽  
pp. 951-959 ◽  
Author(s):  
Zinaz Aisha ◽  
Samina Khatoon
Keyword(s):  
Fiscal Policy ◽  
Granger Causality ◽  
Government Expenditure ◽  
Economic Consequences ◽  
Government Expenditures ◽  
Tax Revenue ◽  
Causality Test ◽  
Long Run ◽  
Short Run ◽  
Tax Hypothesis

This paper establishes empirically the causal relationship and long run relationship between government expenditures and government revenues for the case of Pakistan from 1972 to 2007. Fiscal policy, a short run issue, but that can have testing macro economic consequences. Fiscal policy is viewed as an instrument to mitigate short run fluctuations. In this paper we examine tax/spend or spend/tax hypothesis. For this purpose, bi-directional Granger causality will be applied for instance flow from government expenditure to revenue or revenue to government expenditure. This issue has been concerned with intretemporal relationship between revenue and expenditure, so to check long run relationship Engel Granger cointegration will be used. For checking data stationary, non stationary unit root, and ADF/DF approaches give the proof for this hypothesis. The results show the presence of co-integration between government expenditure and tax revenue variables implying evidence of a stable long-run relationship between them. The Granger Causality test suggest the unidirectional causality flow from government expenditure to tax revenue. Keywords: Government Expenditures, Government Revenues, Granger Causality, Stationary, Co-integration

Electoral Promises and Single Party Governments: The Role of Party Ideology and Budget Balance in Pledge Fulfillment

2018 ◽  
Vol 51 (4) ◽  
pp. 907-927 ◽  
Author(s):  
François Pétry ◽  
Dominic Duval
Keyword(s):  
Government Spending ◽  
Budget Deficit ◽  
Comparative Perspective ◽  
Budget Balance ◽  
Noticeable Increase ◽  
Party Ideology ◽  
Over Time ◽  
Budget Surplus

AbstractThe determinants of fulfilling campaign promises in Canada over the period 1994–2015 are analyzed in a comparative perspective. All other factors being equal, we find that promises to reduce government spending are more likely to be fulfilled by the Conservatives than by the Liberals. Majority and re-elected governments facing a budget surplus are more likely to fulfill their election promises than minority and newly elected governments facing a budget deficit. Promises are more likely to be fulfilled at the start than at the end of a mandate. We also find a small but noticeable increase in the rate of fulfilling campaign promises over time.

Taiwan's Burgeoning Budget Deficit: A Crisis in the Making?

Asian Survey ◽  
2005 ◽  
Vol 45 (3) ◽  
pp. 383-396 ◽  
Author(s):  
Chien-Hsun Chen
Keyword(s):  
Social Welfare ◽  
Government Spending ◽  
Budget Deficit ◽  
Budget Deficits ◽  
Structural Unemployment ◽  
Long Run ◽  
Negative Growth

The Taiwan economy in recent years has been plagued by low or negative growth and rising structural unemployment, two kinds of turbulence that have been developing for some time. Underneath these economic woes is the even more serious problem of growing budget deficits that, if unchecked, could lead to a slippery road for Taiwan in the long run. Shrinking revenue and rising government spending in social welfare areas cause widening budget deficits. The continual swelling of these deficits is an important area requiring reform.

scholarly journals A Pitfall with Estimated DSGE-Based Government Spending Multipliers

2013 ◽  
Vol 5 (4) ◽  
pp. 141-178 ◽  
Author(s):  
Patrick Fève ◽  
Julien Matheron ◽  
Jean-Guillaume Sahuc
Keyword(s):  
Government Policy ◽  
Government Spending ◽  
Private Consumption ◽  
Government Expenditures ◽  
Long Run ◽  
The Government ◽  
Endogenous Component

This paper examines issues related to the estimation of the government spending multiplier (GSM) in a DSGE context. We stress a source of bias in the GSM arising from the combination of endogenous government expenditures and Edgeworth complementarity between private consumption and government expenditures. Due to cross-equation restrictions, omitting the endogenous component of government policy at the estimation stage would lead an econometrician to underestimate the degree of Edgeworth complementarity and, consequently, the long-run GSM. An estimated version of our model with US postwar data shows that this bias matters quantitatively. The results are robust to a number of perturbations. (JEL E13, E23, E32, E62, H50)

Further evidence on the causal relationship between government spending and economic growth: The case of Greece, 1958–2004

2009 ◽  
Vol 59 (1) ◽  
pp. 57-78 ◽  
Author(s):  
C. Katrakilidis ◽  
P. Tsaliki
Keyword(s):  
Economic Growth ◽  
Government Spending ◽  
Government Expenditures ◽  
Economic Output ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Recent Developments ◽  
Short Run ◽  
Greek Economy ◽  
Using Data

The purpose of this paper is the empirical testing of the relationship between economic growth and government spending and, at the same time, to determine the extent to which economic growth causes growth in government expenditures (Wagner’s law) or the other way around (Keynesian hypothesis). The econometric analysis, using data for the Greek economy covering the period 1958–2004 and based on recent developments in the theory of cointegrated processes, reveals a long-run equilibrium relationship between government expenditures and economic output. Furthermore, the analysis detects causal effects in both the short-run and long-run horizon running from government expenditures to the level of economic activity and vice versa.

The relationship between LNG price, LNG revenue, non-LNG revenue and government spending in China: An empirical analysis based on the ARDL and SVAR model

2021 ◽  
pp. 0958305X2110536
Author(s):  
Yuanyuan Hao
Keyword(s):  
Government Spending ◽  
Positive Impact ◽  
Positive Influence ◽  
Distributed Lag ◽  
Dynamic Relationship ◽  
Long Run ◽  
Svar Model ◽  
Short Run ◽  
Tax Hypothesis ◽  
The Impact

The present paper examines the dynamic relationship between liquefied natural gas (LNG) price, LNG revenue, non-LNG revenue and government spending (GOVS) in China using autoregressive distributed lag (ARDL) and structural vector auto-regressive (SVAR) model. The goal of carrying out ARDL and SVAR together is to consolidate and strengthen the consistency of the results obtained from both approaches. ARDL results show that a positive influence relationship between both short-run and long-run LNG prices, LNG revenue, non-LNG revenue and GOVS, but there was no significant relationship between LNG price and GOVS. The SVAR also substantiates the results of ARDL test and provides further insight which shows that long-run fiscal synchronization hypothesis is evidenced between the LNG revenue and GOVS, while spend-tax hypothesis exists in the long-run between GOVS and non-LNG revenue. It is also evidenced that there is a complementary relationship between LNG revenue and non-LNG revenue, but this complementary role is stronger than the substitution role. Since non-LNG revenue has a greater impact on GOVS in the short-run, and the impact of LNG prices and LNG revenue on GOVS in the long-run increases over time, thus, GOVS mitigates the direct impact of non-LNG revenue to some extent, and that an appropriate allocation of spending in the non-LNG industry will have a positive impact on the development of the market economy supporting the Keynesian and spend-tax hypothesis.

scholarly journals Public Spending and Economic Growth in the Rentier State: The Case of Kuwait

2016 ◽  
Vol 12 (8) ◽  
pp. 160 ◽  
Author(s):  
Ebrahim Merza ◽  
Noorah Alhasan
Keyword(s):  
Economic Growth ◽  
Time Series ◽  
Government Spending ◽  
Public Spending ◽  
Government Expenditures ◽  
Gdp Growth ◽  
Development Projects ◽  
Rentier State ◽  
Long Run ◽  
Equilibrium Relationship

<p>This paper examines the validity of Wagner’s hypothesis in Kuwait looking specifically at government expenditures in health, education and infrastructure. Using time series analysis, the paper has found a long-run equilibrium relationship between GDP growth and the specified government expenditures. It, however, only found one causal relationship between development expenditures and GDP growth. As such, the paper proposes an expansion in government spending on development projects and reevaluates budget allocation in health and education.</p>

Forming Sources of Long-run Growth: How to Understand Them?

2014 ◽  
pp. 4-20 ◽  
Author(s):  
G. Idrisov ◽  
S. Sinelnikov-Murylev
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
Economic Policy ◽  
Business Cycle ◽  
Capital Markets ◽  
Productivity Growth ◽  
Government Spending ◽  
Long Run ◽  
Accelerate Growth ◽  
Budget Institutions

The paper analyzes the inconsequence and problems of Russian economic policy to accelerate economic growth. The authors consider three components of growth rate (potential, Russian business cycle and world business cycle components) and conclude that in order to pursue an effective economic policy to accelerate growth, it has to be addressed to the potential (long-run) growth component. The main ingredients of this policy are government spending restructuring and budget institutions reform, labor and capital markets reforms, productivity growth.

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