Causal Link between Central Government Revenue and Expenditure: Evidence for India

Yashobanta Parida

Economics Bulletin, 2012, vol. 32, issue 4, 2808-2816

Abstract: This paper attempts to analyze the causal relationship between central government revenue and expenditure for India using annual data over the period 1970-2010. The Johansen cointegration test suggests that there is a long-run relationship among the variables. The result from Granger causality test based on Vector Error Correction Models (VECM) suggests unidirectional causality from expenditure to revenue in the long-run supporting Spend-and-Tax hypothesis. The short-run Granger causality test based on WALD test restriction suggests that there is no causal relationship between the variables.

Keywords: Revenue; Expenditure; fiscal Deficit (search for similar items in EconPapers)
JEL-codes: C5 H5 (search for similar items in EconPapers)
Date: 2012-10-09
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