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Government Tax Revenue, Expenditure and Causality: the Experience of India

Author

Listed:
  • K. Dhanasekaran

    (Gobi Arts and Science College, Gobichettipalayam, Tamil Nadu)

Abstract

The objective of the study is to analyse the dynamics of causal relationship between revenue and expenditure. Although a number of studies have shed light on this issue using Granger-Sims causality tests, the present study attempts to quantify various feedback between revenue and expenditure, along the lines suggested by Geweke and then the results are compared with Granger's causality test. The results showed the absence of co-integration between Government tax revenue and expenditure variables implying no evidence of a stable long run relationship between them. Geweke's test provided different inferences for the causal relationship between TR and GE. In the mdel with TR as the dependent variable, Geweke's test indicated the existence of bi-directional causality, while in the case of the model with GE as dependent variable, Geweke's test showed the absence of any causal relationship between the variables. The Granger's test suggests the uni-directional causality flowing from government expenditure to revenue. To conclude, the causal inferences were found to be sensitive to the specification of the model.

Suggested Citation

  • K. Dhanasekaran, 2001. "Government Tax Revenue, Expenditure and Causality: the Experience of India," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 36(2), pages 359-379, July.
  • Handle: RePEc:dse:indecr:v:36:y:2001:i:2:p:359-379
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    Citations

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    Cited by:

    1. Curran, Louise, 2004. "DDA - Key issues for future research," Conference papers 331313, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Phiri, Andrew, 2018. "Fiscal sustainability in BRICS countries: Evidence from asymmetric unit root tests augmented with Fourier fucntion," MPRA Paper 85501, University Library of Munich, Germany.
    3. Phiri, Andrew, 2019. "Fiscal sustainability in BRICS countries: evidence from asymmetric unit root test augmented with Fourier function," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 15(2).
    4. Biswajit Maitra, 2011. "Tax-and-Spend Principle in Budget Management in Sri Lanka in the Post-reform Period," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 5(3), pages 343-359, August.
    5. Francisco G. Carneiro & Joao R. Faria & Boubacar S. Barry, 2005. "Government Revenues And Expenditures In Guinea-Bissau: Causality And Cointegration," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 30(1), pages 107-117, June.
    6. Kausik Chaudhuri & Bodhisattva Sengupta, 2009. "Revenue-Expenditure Nexus for Southern States: Some Policy Oriented Econometric Observations," Working Papers 2009-048, Madras School of Economics,Chennai,India.
    7. Yaya Keho, 2010. "Spending Cuts or Tax Adjustments: How Can UEMOA Countries Control Their Budget Deficits?," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 9(3), pages 233-252, December.
    8. Oluwole Owoye & Olugbenga A. Onafowora, 2011. "The Relationship between Tax Revenues and Government Expenditures in European Union and Non-European Union OECD Countries," Public Finance Review, , vol. 39(3), pages 429-461, May.

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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