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The Intertemporal Relation Between Government Revenue and Expenditure in the United Kingdom, 1750-2004

Author

Listed:
  • Lusine Lusinyan

    (International Monetary Fund)

  • John Thornton

    (Bangor University)

Abstract

We examine the intertemporal relation between government revenue and expenditure in the UK during 1750–2004. We pay particular attention to long-run trends by applying a battery of unit root and cointegration techniques to the data, and we use a modified Granger-causality test on data spans organized around structural breaks in the series. The results suggest that, allowing for structural breaks, UK real revenue and spending are I(1) series and cointegrated and that Granger-causality runs from government spending to revenue. As such, the ‘spend-tax’ hypothesis appears to best characterize the long-run intertemporal relation between government revenue and spending in the UK.

Suggested Citation

  • Lusine Lusinyan & John Thornton, 2010. "The Intertemporal Relation Between Government Revenue and Expenditure in the United Kingdom, 1750-2004," Working Papers 10007, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    • Handle: RePEc:bng:wpaper:10007
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    Cited by:

    1. Dervis Kirikkaleli & Bugra Ozbeser, 2023. "Government Expenditures and Tax Revenues in the United States of America," SAGE Open, , vol. 13(1), pages 21582440231, March.
    2. Teresa Famulska & Jan Kaczmarzyk & Malgorzata Grzaba, 2020. "The Relationship Between Tax Revenue and Public Social Expenditure in the EU Member States," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 1136-1156.
    3. Syed Ali Raza & Syed Zaki Hassan & Arshian Sharif, 2019. "Asymmetric Relationship Between Government Revenues and Expenditures in a Developing Economy: Evidence from a Non-linear Model," Global Business Review, International Management Institute, vol. 20(5), pages 1179-1195, October.
    4. Fabricio Linhares & Glauber Nojosa, 2020. "Changes in the tax-spend nexus: Evidence from selected European countries," Economics Bulletin, AccessEcon, vol. 40(4), pages 3077-3087.

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    More about this item

    Keywords

    Government revenue and expenditure; Unit roots; Cointegration; Causality; Structural breaks;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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