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Testing the Relationship Between Government Spending and Revenue: Evidence From GCC Countries

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  • Mr. Qing Wang
  • Mr. Ugo Fasano-Filho

Abstract

The paper examines the direction of causality between total government expenditure and revenue in oil-dependent GCC countries by utilizing a cointegration and error-correction modeling framework, and by calculating a variance decomposition analysis. In addition, it presents impulse responses to shed light on the dynamic relation of expenditure to a revenue shock. The results confirm expectations that government spending follows oil revenue, suggesting a pro-cyclical expenditure policy to variations in oil revenue. To make budget expenditure less driven by revenue availability, the authorities could resort to a medium-term expenditure framework, so that expenditures can be planned and insulated from volatile short-term revenue availability.

Suggested Citation

  • Mr. Qing Wang & Mr. Ugo Fasano-Filho, 2002. "Testing the Relationship Between Government Spending and Revenue: Evidence From GCC Countries," IMF Working Papers 2002/201, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2002/201
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    References listed on IDEAS

    as
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    4. Mr. Ugo Fasano-Filho, 2000. "Review of the Experience with Oil Stabilization and Savings Funds in Selected Countries," IMF Working Papers 2000/112, International Monetary Fund.
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