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Fiscal policy dynamics in Australia and New Zealand

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  • Gerard Antioch

Abstract

This paper uses cointegration and error correction modelling to investigate how Governments across the Tasman have corrected fiscal imbalances. Australian Governments have used revenue and expenditure adjustments to correct long term fiscal imbalance. In the short term, however, taxes constrain spending in Australia. In New Zealand, expenditure adjustments are relied upon to correct long term fiscal imbalance. Thus, in neither country it could be said that spending priorities predominately drive decisions to raise taxes.

Suggested Citation

  • Gerard Antioch, 1998. "Fiscal policy dynamics in Australia and New Zealand," Applied Economics Letters, Taylor & Francis Journals, vol. 5(9), pages 539-541.
    • Handle: RePEc:taf:apeclt:v:5:y:1998:i:9:p:539-541
    DOI: 10.1080/758529495
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    References listed on IDEAS

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    1. Oluwole Owoye, 1995. "The causal relationship between taxes and expenditures in the G7 countries: cointegration and error-correction models," Applied Economics Letters, Taylor & Francis Journals, vol. 2(1), pages 19-22.
    2. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
    3. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
    4. Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May.
    5. Matiur Rahman & Muhammed Mustafa & Eldon Bailey, 1996. "US budget deficits, inflation and exchange rate: a cointegration approach," Applied Economics Letters, Taylor & Francis Journals, vol. 3(6), pages 365-368.
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    Cited by:

    1. Mr. Jean-Claude Nachega & Mr. Ousmane Dore, 2000. "Budgetary Convergence in the WEAMU: Adjustment Through Revenue or Expenditure?," IMF Working Papers 2000/109, International Monetary Fund.

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