Dynamics of Public Policy on Economic Activity: The Case of Pakistan

The unanticipated domestic and international changes in conjunction with policy discretion become reason for shocks to overall economy that affect overall economic growth. Based on methodology by Blanchard and Perotti (2002) the study used timing of fiscal decisions in a Structural Vector Auto-Regression (SVAR) to map dynamics of shocks due to tax revenue, government expenditures and aggregate output in Pakistan. When tax decisions precede expenditure decision, the tax shocks have a volatile short run impact causing expenditures to sharply adjust. Expenditure shocks persistently increase tax revenues and government expenditures. But in the second specification, expenditure shocks reduce the tax revenue and aggregate output that reverts to equilibrium only in the long run. The response of output shocks is almost identical for both the scenarios. Therefore, growth in output increases taxes collection in Pakistan enabling better management of burden of debt and deficit.

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Analysis of Tourist Flow from the US to Taiwan

Acta Oeconomica ◽

10.1556/032.65.2015.s2.27 ◽

2015 ◽

Vol 65 (s2) ◽

pp. 369-384 ◽

Cited By ~ 1

Author(s):

Yen-Hsun Chen ◽

Hsin-Hong Kang

Keyword(s):

Tourism Demand ◽

Cost Of Living ◽

Policy Makers ◽

Long Run ◽

The Us ◽

Short Run ◽

Vector Auto Regression ◽

The Cost ◽

Auto Regression ◽

Tourist Flow

It is important for Taiwanese policy makers to understand how economic factors affect US tourists’ decision to travel to Taiwan. For the long-run analysis, Johansen’s cointegration test reveals that three cointegration vectors exist among the model variables, indicating a long-run relationship. To conduct a short-run analysis, this paper employs vector auto regression (VAR) to estimate the responses of US tourists in Taiwan to the shocks of changes to personal disposable income, cost of living, and substitute price. The short-run equilibrium adjustment processes are discussed in terms of generalized impulse response. The results show an immediate and significant response of changes in tourist arrivals to their own impacts, changes in the cost of living, and changes in the substitute price. In addition, the price, income, and cross-elasticity of tourism demand are all positive at the beginning of the responses, implying that the tourism products can be attributed to normal and substitute goods.

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Government Expenditures and the Growth-Inequality Trade-Off: The Swedish Case

Journal of Income Distribution ◽

10.25071/1874-6322.23829 ◽

2011 ◽

Author(s):

Hector Sala ◽

Oriol Roca-Sagalés

Keyword(s):

Income Inequality ◽

Regression Models ◽

Government Expenditures ◽

Close Attention ◽

Policy Makers ◽

Trade Off ◽

Long Run ◽

The World ◽

Vector Auto Regression ◽

Auto Regression

Sweden is one of the countries with the largest public fiscal intervention and narrowest income inequality in the world. This article investigates to what extent these two features are interconnected and whether economic growth affects and is affected by this relationship. Empirical results from vector auto-regression models reveal the existence of important long-run non-Keynesian effects (i.e., lessening fiscal expansions and, conversely, expansionary fiscal contractions) and significant downward effects of government expenditures on income inequality. The existence of a negative trade-off between growth and inequality is an important stylized fact which deserves close attention by policy makers.

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Estimating Venezuelas Latent Inflation

International Business & Economics Research Journal (IBER) ◽

10.19030/iber.v7i4.3249 ◽

2011 ◽

Vol 7 (4) ◽

Author(s):

Juan Carlos Bencomo ◽

Hugo J. Montesinos ◽

Hugo M. Montesinos ◽

Jose Roberto Rondo

Keyword(s):

Measurement Errors ◽

Price Index ◽

Phillips Curve ◽

Consumer Price Index ◽

Price Increases ◽

Long Run ◽

Vector Auto Regression ◽

Definition Of ◽

Auto Regression ◽

Structural Vector

Percent variation of the consumer price index (CPI) is the inflation indicator most widely used. This indicator, however, has some drawbacks. In addition to measurement errors of the CPI, there is a problem of incongruence between the definition of inflation as a sustained and generalized increase of prices and the traditional measure associated with the CPI. We use data from 1991 to 2005 to estimate a complementary indicator for Venezuela, the highest inflation country in Latin America. Latent inflation is defined as that component of measured inflation that has no impact on real output in the long-run. This notion, consequently, is consistent with a vertical long-run Phillips curve and therefore it is grounded on economic theory. Latent inflation is constructed placing dynamic restrictions on a structural vector auto regression system. We find that latent inflation reflects more closely the generalized and sustained price increases most likely to be impacted by monetary policy. Our results are consistent with the identifying restrictions and with the theoretical definition of inflation.

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

The Pakistan Development Review ◽

10.30541/v48i4iipp.951-959 ◽

2009 ◽

Vol 48 (4II) ◽

pp. 951-959 ◽

Cited By ~ 5

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

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Unlocking Pakistan’s Revenue Potential

South Asian Journal of Macroeconomics and Public Finance ◽

10.1177/2277978718760068 ◽

2018 ◽

Vol 7 (1) ◽

pp. 17-36

Author(s):

Serhan Cevik

Keyword(s):

Economic Activity ◽

Instrumental Variable ◽

Significant Variation ◽

Tax Revenue ◽

Correction Model ◽

Long Run ◽

Short Run ◽

Fiscal Space ◽

Revenue Administration ◽

Identification Strategy

Pakistan’s tax revenue remains low relative to comparator countries and the tax effort expected for the country’s level of development. This creates significant challenges in providing the much-desired fiscal space to expand growth-enhancing expenditure on infrastructure, education, health care and targeted social assistance. This article estimates both short-run and long-run elasticities of tax revenue in Pakistan over the period 1960–2015 to better understand the evolution of tax revenue in the context of changing economic activity, using a novel identification strategy based on the instrumental variable (IV) approach and an error correction model (ECM) to address concerns about the potential endogeneity of tax revenue and economic growth. The empirical results indicate that both short-run and long-run elasticities of tax revenue are slightly above 1 over the sample period. There is, however, significant variation in short-run and long-run elasticities across subcategories of tax revenue. These findings underscore the need for a concerted agenda of comprehensive reforms at federal and provincial levels aimed at broadening tax bases, strengthening revenue administration and taxpayer compliance, eliminating distortionary and overgenerous tax concessions and exemptions, and rationalizing tax policy in an efficient and equitable manner. JEL: C23, C32, E62, H2, H62, H68

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

SHS Web of Conferences ◽

10.1051/shsconf/202112404002 ◽

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.

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AN ANALYSIS OF THE MANAGEMENT OF FISCAL DEFICIT OF PAKISTAN: AN ECONOMETRIC STUDY OF AUTO-REGRESSIVE DISTRIBUTIVE LAGS (ARDL) APPROACH

The Singapore Economic Review ◽

10.1142/s0217590818500352 ◽

2018 ◽

pp. 1-30 ◽

Cited By ~ 1

Author(s):

KHURRAM EJAZ CHANDIA ◽

MUHAMMAD BADAR IQBAL ◽

SAIRA AZIZ ◽

IFRA GUL ◽

BINESH SARWAR

Keyword(s):

Fiscal Policy ◽

Federal Government ◽

Government Expenditures ◽

Fiscal Deficit ◽

Policy Reforms ◽

Causality Test ◽

Long Run ◽

Ardl Approach ◽

Short Run ◽

Auto Regressive

Fiscal policy is an essential ingredient of economic performance. The fiscal policy is considered as a short-run measure; however, this has long-lasting outcomes for any economy. The current study has examined the connection among different constituents of fiscal policy, i.e., federal government revenues and federal government expenditures; federal government revenues and different components of federal government expenditures; federal government expenditures and different components of federal government revenues and fiscal deficit and influential budgetary variables in the context of the economy of Pakistan. The study has empirically investigated the relationship among the budgetary variables for Pakistan from 1979 to 2017. For data analysis, time-series econometric techniques such as auto-regressive distributive lag (ARDL) approach and Granger causality test have been employed. The results of ARDL bounds test approach suggest the existence of long-run equilibrium relationship among the variables. The result of CUSUM and CUSUMSQ shows the stability of functional relationship tested in this study, which means that model is a useful instrument for policymaking. So, a rise or fall in budgetary variables causes changes in fiscal deficit in long run. The results of study endorse the proof of spent-and-tax hypothesis in the economy of Pakistan. The study suggests the need for extensive fiscal policy reforms in Pakistan.

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Taxation, government spending and economic growth: The case of Bulgaria

Journal of Tax Reform ◽

10.15826/jtr.2021.7.3.102 ◽

2021 ◽

Vol 7 (3) ◽

pp. 255-266

Author(s):

G. Ganchev ◽

◽

I. Todorov ◽

Keyword(s):

Economic Growth ◽

Growth Rate ◽

Tax Revenue ◽

Gdp Growth ◽

Real Gdp ◽

Long Run ◽

Gdp Growth Rate ◽

Short Run ◽

The Impact

The objective of this article is to estimate the impact of three fiscal instruments (direct taxes, indirect taxes, and government expenditure) on Bulgaria’s economic growth. The study employs an autoregressive distributed lag model (ARDL) and Eurostat quarterly seasonally adjusted data for the period 1999–2020. Four control variables (the shares of gross capital formation, household consumption, and exports in GDP as well as the economic growth in the euro area) are included in the model to account for the influence of non-fiscal factors on Bulgaria’s real GDP growth rate. The empirical results indicate a long-run equilibrium relationship between Bulgaria’s economic growth and the independent variables in the ARDL. In the short term, Bulgaria’s real GDP growth rate is affected by its own past values and the previous values of the shares of direct tax revenue, exports, government consumption, and indirect tax revenue in GDP. In the long term, Bulgaria’s economic growth is influenced by its own previous values and the past values of the share of household consumption in GDP and the euro area’s real GDP growth rate. Fiscal instruments can be used to stabilize Bulgaria’s growth in the short run but they are neutral in the long run. The direct tax revenue, government consumption, and indirect tax revenue are highly effective and can be used as tools for invigorating and stabilizing Bulgaria’s economic growth in the short run. However, in the long term, the real GDP growth rate can be hastened only by encouraging domestic demand (final consumption expenditure of households) and promoting exports. This research cannot answer the question of whether flat income taxation stabilizes the economy or not, since it does not separate the impact of tax rate changes from the influence of tax base modifications.

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Analysis of Indonesian Tax Revenue

AFEBI Economic and Finance Review ◽

10.47312/aefr.v1i01.15 ◽

2017 ◽

Vol 1 (01) ◽

pp. 71

Author(s):

Amalia Wijayanti ◽

Firmansyah Firmansyah

Keyword(s):

Exchange Rate ◽

Error Correction ◽

Government Spending ◽

Inflation Rate ◽

Correction Term ◽

Error Correction Model ◽

Tax Revenue ◽

Correction Model ◽

Long Run ◽

Short Run

This study analyzes the long-run and short-run effect of macroeconomic factors, such as real Gross Domestic Product (GDP), inflation rate, exchange rate and government spending on Indonesia’s tax revenue during 1976-2013, by utilizing the Error Correction Model (ECM). The finding of the study demontrates that in the long-run; the real GDP, exchange rate, and government spending affect Indonesia’s tax revenue, except the inflation rate. In short-run, Indonesia’s tax revenue statisically affected by government spending, while others variable do not influence Indonesia’s tax revenue. Error Correction Term (ECT) coefficient is 0.221, explains incompatibility tax revenue occur in long-run is corrected of 22 percent in one period. JEL Classification: E01, E20, H20 Keywords: Error Correction Model, Macroeconomic, Tax revenue

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Research on Performance and Valuation of Enterprises Placarded by Others Based on the Improved Panel Vector Auto-Regression Model

Applied Economics and Finance ◽

10.11114/aef.v5i3.3006 ◽

2018 ◽

Vol 5 (3) ◽

pp. 34

Author(s):

Na Luo

Keyword(s):

Impulse Response Function ◽

Stable State ◽

Point Of View ◽

Secondary Market ◽

Short Term ◽

Dummy Variable ◽

Long Run ◽

Vector Auto Regression ◽

Good Signal ◽

Auto Regression

In recent years, enterprises, which were placarded, have become a heated issue in the secondary market in China. However, there still lack researches about the performance and valuation of those enterprises which were placarded. Therefore, it seems that it is lack of persuasion to use the word “barbarians” to define the enterprises which carry out placard. For the reasons above, this paper makes the use of the improved PVAR model to give an empirical analysis on the performance and valuation of the enterprises placarded, based on the samples between 2011 and 2015. First, this paper divides the whole samples into two subsample groups by the dummy variable, according to the certain point of time whether the enterprise has been placarded. After that, it build two PVAR models combining the performance indicators and the valuation indicators. The results show that the sensitivity of the target enterprise’s performance is not as good as its valuation. Second, the two subsample groups are analyzed by the impulse response function. It explains that placard creates an incentive effect for the target enterprise in the short term. Third, by using the variance decomposition, this paper achieves a conclusion that placard reduces the dependence of the target enterprise on the aspects of its valuation, profitability, size and risk. Therefore, placard is a good signal for those target enterprises on the whole, which brings a nice momentum for the enterprises on the valuation, profitability, size and risk in the short term. In the long run, the enterprises will adjust to a stable state based on the short-term changes. From this point of view, “barbarians at the gate” bring the motivation rather than chaos.

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