Assessment of Budget Sustainability in Sarawak
Evan Lau and
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Hui-Fern Teo: Faculty of Economics and Business, Universiti Malaysia Sarawak
Asian Economic and Financial Review, 2012, vol. 2, issue 8, 952-965
This study reexamines the sustainability of budget stance of Sarawak state, 1970-2008. Using the intertemporal borrowing constraint as a framework, the study tests the long-run relationship between government revenue and expenditure. Empirical results demonstrate a long-run equilibrium relationship among the variables. The cointegration test result suggests that Sarawak state’s fiscal stance satisfies the weak sustainability condition. In addition, the Granger causality test result reveals a bi-directional relationship between government revenue and expenditure. This means that fiscal authorities made simultaneous decisions on expenditure and revenue. Government revenue and expenditure will mutually reinforce each other.
Keywords: Fiscal Sustainability; Cointegration; Revenue; Expenditure; GDP and Sarawak. (search for similar items in EconPapers)
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Persistent link: http://EconPapers.repec.org/RePEc:asi:aeafrj:2012:p:952-965
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