Fiscal Sustainability: Public Revenue-Expenditure Nexus in a Few Asymmetric Countries in the Globe

Updata:01-01-1970

Source:
By:Aoulad Hosen

DOI: https://doi.org/10.30564/jesr.v5i1.3867

Abstract:

This article examines the public revenue and expenditure patterns and its nexus of a few countries. This paper employs panel unit root, panel cointegration and Vector Error Correction Model to analyze the inter-temporal association among the variables of government revenues, expenditures and the growth of GDP through the panel data of ten divergent nations over the period 2001 to 2017. The study exercised three cointegration tests and these estimates find the evidence of long run association among articulated three variables. To know the cross-section status of different nations this paper diverted Phillips-Peron test with bandwidth statistics and it asserted that, all ten countries secured the long run association among the variables. The study uncovered that, growth of GDP has escalated in 0.78% by one percentage increase in revenue expenditure; meanwhile, 1.41% lessening in GDP growth by one percentage increase in revenue income. The specified model is supported by a few diagnostic tests.

References:

[1]Jain, M., Nagpal, A., Jain, A., 2021. Government size and economic growth: An empirical examination of selected emerging economies. South Asian Journal of Macroeconomics and Public Finance. 10(1), 7-39. DOI: https://doi.org/10.1177/2277978720979889 [2]Tan, T.C., Mohamed, A., Habibullah, M.S., Chin, L., 2020. The impacts of monetary and fiscal policies on economic growth in Malaysia, Singapore and Thailand. South Asian Journal of Macroeconomics and Public Finance. 9(1), 114-130. DOI: https://doi.org/10.1177/2277978720906066 [3]Sanusi, K.A., 2020. On the relation between government expenditure and revenue in South Africa: An empirical investigation in a nonlinear framework. Cogent Economics & Finance. 8(1)1803523, 2-21. DOI: https://doi.org/10.1080/23322039.2020.1803523 [4]Chang, T., Ho, Y.H., 2002a. Tax or spend, what causes what: Taiwan’s experience. International Journal of Business and Economics. 1(2), 157-165. [5]Obeng, S.K., 2015. A causality test of the revenue-expenditure nexus in Ghana. ADRRI Journal of Arts and Social Sciences. 11(1), 1-19. http:// www. journals.adrri.org. [6]Baharumshah, A.Z., Jibrilla, A.A., Sirag, A., Ali, H.S., Muhammad, I.M., 2016. Public revenue-expenditure nexus in south Africa: Are there asymmetries? South African Journal of Economics. 84(4), 520-537. [7]Aslan, M., Tasdemir, M., 2009. Is fiscal synchronization hypothesis relevant for Turkey? Evidence from cointegration and causality tests with endogenous structural breaks. EconAnadolu: Anadolu International Conference in Economics, Eskisehir, Turkey. [8]Mehrara, M., Pahlavani, M., Elyasi, Y., 2011. Government revenue and government expenditure nexus in Asian countries: panel cointegration and causality. International Journal of Business and Social Science. 2(7), 199-207. [9]Chang, T., Ho, Y.H., 2002b. A note on testing taxand-spend, spend-and-tax or fiscal synchronization: the case of China. Journal of Economic Development. 27(1), 151-160. [10]Afonso, A., 2004. Fiscal sustainability: the unpleasant European case. Conferences and seminars paper held in Lisbon and Athens, Portugal. [11] Brady, G.L., Magazzino, C., 2018. Fiscal sustainability in the EU. Atlantic Economic Journal. l(46), 297- 311. DOI:http://doi.org/10.1007/s11293-018-9588-4 [12] Hosen, A., Asad, 2018. Reconciliation between taxation and GDP growth in Bangladesh: issues and arguments for social justice. International Journal of Research in Commerce, Economics & Management. 8(10), 1-11. https://ijrcm.org.in/article_info.php?article_id=8755. [13] Hosen, A., 2019. GDP growth and indirect taxation in Bangladesh: related issues, consequences and expectation. International Journal of Business and Economics Research. 8(5), 286-296. DOI:https://doi.org/10.11648/j.ijber.20190805.15 [14] Rosoiu, I., 2015. The impact of the government revenues and expenditures on the economic growth. Procedia Economics and Finance. 32, 526-533. DOI:https://doi.org/10.1016/S2212-5671(15)01428-8 [15] Choong, C.K., Lau, E., Liew, V.K.S., Puah, C.H., 2010. Does debts foster economic growth? the experience of Malaysia. African Journal of Business Management. 4(8), 1565-1575. https://academicjournals. org/AJBM. [16] Iiyambo, H., Kaulihowa, T., 2020. An assessment of the relationship between public debt, government expenditure and revenue in Namibia. Public Sector Economics. 44(3), 331-353. [17] Ali, S., Ahmad, N., Khalid, M., 2010. The effects of fiscal policy on economic growth: empirical evidences based on time series data from Pakistan. The Pakistan Development Review. 49(4), 497-512. [18] Raza, S.A., Hassan, S.Z., Sharif, A., 2019. Asymmetric Relationship Between Government Revenues and Expenditures in a Developing Economy: Evidence from a Non-linear Model. Global Business Review. 20(5), 1179-1195. DOI:https://doi.org/10.1177%2F0972150919846800 [19] Magazzino, C., 2012. Wagner versus Keynes: public spending and national income in Italy. Journal of Policy Modeling. 34, 890-905. www.elsevier.com/ locate/jpm. [20] Dickey, D.A., Fuller, W.A., 1981. Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica. 49(4), 1057-1072. [21] Levin, A., Lin, C.F., Chu, C.S.J., 2002. Unit root tests in panel data: asymptotic and finite-sample properties. Journal of Econometrics. 108, 1-24. [22] Maddala, G.S., Wu, S., 1999. A comparative study of unit root tests and a new simple test. Oxford Bulletin of Economics and Statistics. 61, 631-652. [23] Choi, I., 2001. Unit root tests for panel data. Journal of International Money and Finance. 20, 249-272. [24] Johansen, S., 1988. Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control. 12, 231-254. [25] Fisher, R.A., 1932. Statistical methods for research workers. 4th ed., Edinburgh: Oliver & Boyd. [26] Pedroni, P., 2004. Panel cointegration: asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory. 20, 597-625. [27] Kao, C.D., 1999. Spurious regression and residual-based tests for cointegration in panel data. Journal of Econometrics. 90, 1-44. [28] MacKinnon James, G., Alfred, A., Haug Michelis, L., 1999. Numerical distribution functions of likelihood ratio tests for cointegration. Journal of Applied Econometrics. 14, 563-577. [29] Musgrave, R., 1966. Principles of budget determination. In Cameron, H. and Henderson, W. (Eds.), Public Finance: Selected readings. New York: Random House. [30] Meltzer, A., Richard, S., 1981. A rational theory of the size of government. Journal of Political Economy. 89, 914-27. [31] Antonis, A., 2013. Wagner’s law versus Keynesian hypothesis: evidence from pre-WWII Greece. Panoeconomicus. 4, 457-472. DOI:https://doi.org/10.2298/PAN1304457A [32] Arestis, P., 2011. Fiscal policy is still an effective instrument of macroeconomic policy. Panoeconomicus. 58(2), 143-156. DOI:https://doi.org/10.2298/PAN1102143A

Tags: