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The Nexus between Federal Revenue and Spending in Canada: A Time-Frequency Perspective

Author

Listed:
  • Wang Yu

    (Department of International Studies, Xi’an Jiaotong-Liverpool University, Suzhou, P.R. China)

  • Wei William X.

    (Faculty of Business and Economics, Algoma University, Sault Ste. Marie, Canada)

Abstract

The theoretical literature on the revenue-spending nexus suggests four possible relationships. They are tax-and-spend, negative tax-and-spend, spend-and-tax, and fiscal synchronization. Despite their homogenous research design, the empirical studies of Canada have provided mixed and inconclusive results. This study re-examines the topic from a time-frequency perspective. Specifically, it applies continuous wavelet analysis to the period 1867–2017 to delineate a complete picture of the revenue-spending nexus in Canada. Although results show the existence of all relationships suggested by theory at different time-frequency combinations, the spend-and-tax pattern is the most striking one and dominates the nexus in the long run. Theoretical, methodological, and policy-wise implications of this study are discussed at the end.

Suggested Citation

  • Wang Yu & Wei William X., 2023. "The Nexus between Federal Revenue and Spending in Canada: A Time-Frequency Perspective," Statistics, Politics and Policy, De Gruyter, vol. 14(1), pages 113-123, March.
    • Handle: RePEc:bpj:statpp:v:14:y:2023:i:1:p:113-123:n:7
    DOI: 10.1515/spp-2022-0021
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