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Testing the Relationship Between Income and Expenditure of a Statutory Organization: Cointegration and Causality Approach

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  • Neha Rajput

    (Guru Nanak Dev University)

  • G. S. Bhalla

    (Guru Nanak Dev University)

Abstract

The Central Pollution Control Board (CPCB) and State Pollution Control Boards (SPCB) are the environmental institutions in India for the management and regulation of environmental laws. The purpose of this paper is to study the causality between income and expenditure of the CPCB. The data was collected from 1983 to 2020 from the annual reports of the CPCB. A unit root test has been applied in this study to test the stationarity of data. Johansen cointegration test is applied to determine the long-run relationship among variables. For determining optimum lag, the VAR lag order selection criterion has been applied. The VECM has been applied to study the direction of the causal relationship between income and expenditure of the CPCB. The result suggested stationarity of total income and expenditure at the first difference and second difference. There is a unidirectional causal relationship among variables that is found from total income to total expenditure in the long run. No short-run causal relationships among variables are found in this study. Thus, findings suggest that any change in the total income of the CPCB will induce a change in its total expenditure.

Suggested Citation

  • Neha Rajput & G. S. Bhalla, 2024. "Testing the Relationship Between Income and Expenditure of a Statutory Organization: Cointegration and Causality Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 4338-4355, March.
    • Handle: RePEc:spr:jknowl:v:15:y:2024:i:1:d:10.1007_s13132-023-01201-3
    DOI: 10.1007/s13132-023-01201-3
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