Fiscal Deficit and Inflation: What Causes What? The Case of India

2012 ◽  
Vol 13 (1) ◽  
pp. 57-81
Author(s):  
Aviral Kumar Tiwari ◽  
A. P. Tiwari ◽  
Bharti Pandey
Keyword(s):  
Granger Causality ◽  
Money Supply ◽  
Government Expenditure ◽  
Granger Causality Test ◽  
Fiscal Deficit ◽  
Causality Analysis ◽  
Causality Test

This study has made an attempt to examine the direction of causality among the fiscal deficit, government expenditure, money supply, and inflation. In the present study we have employed Dolado and L체tkepohl (DL) (1996) and standard Granger-causality approach to examine the direction of the causality among the test variables. However, we have found conflicting results for India. Causality analysis based on DL approach suggests that both government expenditure and money supply Granger-cause fiscal deficit while standard Granger-causality test indicates that only government expenditure Granger-cause fiscal deficit. And money supply Granger-cause government expenditure and fiscal deficit Granger-cause money supply.

scholarly journals Granger Causality Between Local Government Expenditure and Economic Growth in Indonesia

2018 ◽  
Vol 3 (4) ◽  
pp. 80-86
Author(s):  
Sri Kurniawati
Keyword(s):  
Economic Growth ◽  
Local Government ◽  
Granger Causality ◽  
Government Expenditure ◽  
Granger Causality Test ◽  
Reciprocal Relationship ◽  
Series Data ◽  
Causality Test ◽  
West Kalimantan ◽  
Integration Test

Objective - This study examines the causal relationship between government expenditure and economic growth in West Kalimantan between 2009 and 2015. This research resulted in the enactment of Wagner's Law and/or Keynes's Theory in West Kalimantan leading the local government to take the right policies as an effort towards improving economic development. Methodology/Technique - By using panel data that combines time series data and cross-site data, it will be estimated by the Granger causality test which begins with a stationary test and co-integration test. Based on the co-integration tests, the results suggest that there is a long-term relationship between government expenditure and economic growth. Meanwhile, based on the Granger causality test, there is no reciprocal relationship between government expenditure and economic growth. Findings - A direct relationship in the form of the influence of government expenditure on economic growth in West Kalimantan. Novelty - These results are in line with the Keynes's Theory through its national income function. Type of Paper: Empirical Keywords: Government Expenditure; Economic Growth; Co-integration; Causality. JEL Classification: F40, F43, F49.

scholarly journals Investigating the Relationship between Unemployment and Inflation in Nigeria

2021 ◽  
Vol 04 (03) ◽  
Author(s):  
Charity I. Anoke I. Anoke ◽  
Keyword(s):  
Foreign Direct Investment ◽  
Granger Causality ◽  
Direct Investment ◽  
Economic Status ◽  
Government Expenditure ◽  
Negative Relationship ◽  
Granger Causality Test ◽  
Causality Test ◽  
Long Run ◽  
The Impact

This study considered the impact of inflation on unemployment in Nigeria viz avis selected macroeconomic variables. The researcher adopted co integration, vector error correction model and VEC Granger causality test econometric procedure in the analysis of the data employed. The specific objectives of the study are; (i) to determine the extent to which inflation impact on unemployment in Nigeria within the period of study, (ii) to examine if government expenditure have any significant impact on unemployment in Nigeria within the period of study, (iii) to estimate the significant impact of foreign direct investment on unemployment in Nigeria within the period of study; (iv) to investigate the extent of direction of causality between unemployment and inflation in Nigeria within the period of study. The results of the research revealed long run relationship among estimated variables, VECM result showed a positive significant relationship between inflation and unemployment in the short run and long run, government expenditure and foreign direct investment maintained negative relationship with unemployment both in the short and long run. The VEC Granger causality test indicated causality among UNEM, INF and TGEX. The research recommended that (i) government should focus on policy and strategy that can attract foreign direct investment into the country, (ii) government should try to maintain low inflation rate through suitable monetary policy; (iii) government should encourage investment platforms and enabling environment for effective and efficient national output; and (iv) Government should consciously increase fiscal space for capital activities and projects that are capable of generating income, increase domestic and public spending, improve economic status and reduce unemployment. This paper concluded that the Philip’s curve hypothesis does not apply in Nigeria within the period of study as the result failed to establish an inverse relationship as postulated by A.W. Philips.

scholarly journals The Short and Long Run Effects of Selected Variables on Tax Revenue - A Case Study

2018 ◽  
Vol 5 (5) ◽  
pp. 23
Author(s):  
Sima Siami-Namini ◽  
Daniel Muhammad ◽  
Fahad Fahimullah
Keyword(s):  
Local Government ◽  
Granger Causality ◽  
Government Expenditure ◽  
Granger Causality Test ◽  
Sales Tax ◽  
Tax Revenue ◽  
Causality Test ◽  
The Real ◽  
Long Run ◽  
Local Government Expenditure

The main objective of this article is to empirically examine the short and long-run relationship between real tax revenue and real local government expenditure as well as investigate the relationship between real sales tax revenue and real individual tax revenue and selective variables in Washington, D.C. for the period ranging from 1984-2015. The study uses the Johansen co-integration techniques as well as the bivariate and multivariate vector error correction model (VECM). The results indicate that there is a unidirectional and one-way causality running from real local government expenditure to the real DC’s tax revenue in the short and long-run, but not vice versa. The finding indicates that DC’s tax revenue changes local government expenditure. As a result, budget deficits can be avoided by implementing policies that stimulate DC’s tax revenue. The Granger-causality test shows that DC resident employment does affect real individual tax in the short and long-run, simultaneously. The Granger-causality test shows that DC resident employment, household’s population and stock of housing does affect real sales tax revenue in the short and long-run simultaneously. Furthermore, the results of the impulse response function (IRF) indicate that household’s population and stock of housing are the major short-run effect on the real individual income tax and real sales tax revenue.  

scholarly journals The causal relationship between government revenue and expenditure in Namibia

2008 ◽  
Vol 2 (2) ◽  
pp. 175-186 ◽  
Author(s):  
Joel H. Eita ◽  
Daisy Mbazima
Keyword(s):  
Causal Relationship ◽  
Granger Causality ◽  
Budget Deficit ◽  
Vector Autoregression ◽  
Government Expenditure ◽  
Granger Causality Test ◽  
Government Revenue ◽  
Causality Test ◽  
The Relationship

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 the 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 that unsustainable fiscal imbalances can be mitigated by policies that stimulate government revenue.

scholarly journals Coordination or Dominance of Fiscal and Monetary Policy in Egypt

2019 ◽  
Vol 11 (12) ◽  
pp. 28
Author(s):  
Emad Omar Elhendawy
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Causal Relationship ◽  
Granger Causality ◽  
Money Supply ◽  
Budget Deficit ◽  
Granger Causality Test ◽  
Causality Test ◽  
The Third ◽  
Relationship Of

This study investigates to what extent of coordination between the fiscal and monetary policies in Egypt in the period 1980-2017, it has been adopted in its methodology on the vector error correction and Granger causality test. It concludes that there is a significant relation between money supply and budget deficit on one hand and inflation on the other hand, and that fiscal policy is dominant in monetary policy, as a change of 10% of the budget deficit results in an increase in the inflation rate of 8.1%. As for the Granger causality test. Thus stresses the existence of causal relationship to one direction of inflation against both the budget deficit and the money supply, which affects the budget deficit in the second slowdown. Then it feeds the budget deficit and inflation in the third year, which in turn feeds the budget deficit in the fourth year and the causal relationship between inflation and money supply has concluded that there is a one-way causal relationship of money supply to inflation after four slows and then inflation affects the money supply from the fifth to the tenth slowdown. As for the relationship of the budget deficit to money supply, there may be a one-way causal relationship between the budget deficit and the money supply from the second to the tenth year, except the third year, which also confirms the dominance of fiscal policy on monetary policy in Egypt in the period under consideration.

scholarly journals The Relationship between Government Expenditures and Revenues in Algeria During the Period (1990-2019): Granger Causality Approach

2020 ◽  
Vol 5 (5) ◽  
Author(s):  
Abdelkader Sahed ◽  
Mohammed Mékidiche ◽  
Hacen Kahoui
Keyword(s):  
Causal Relationship ◽  
Granger Causality ◽  
Government Expenditure ◽  
Granger Causality Test ◽  
Government Expenditures ◽  
Causality Test ◽  
Kpss Test ◽  
Adf Test ◽  
The Relationship

The aim of this study is to examines the causal relationship between government revenues and expenditures in Algeria during the period 1990 to 2019. Data properties were analyzed to determine their stationarity using the Dickey-Fuller (ADF) test, Phillips-Perron test and Kwiatkowski, Phillips, Schmidt, Shin (KPSS) test, as well as the Granger Causality Test (1969) of showing the direction. The results show that there is unidirectional causal relationship between government expenditure and revenue with the direction of causality running from government revenues to expenditures.

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