Government spending and revenues in Sweden 1722–2011: evidence from hidden cointegration

Manuchehr Irandoust ()
Additional contact information
Manuchehr Irandoust: Kristianstad University

Empirica, 2018, vol. 45, issue 3, No 5, 543-557

Abstract: Abstract This study examines the long-run causal relationship between government revenues and spending of the Swedish economy over the period 1722–2011. The results based on hidden cointegration technique and a modified version of the Granger non-causality test, show that there exists a long-run and asymmetric relationship between government spending and government revenues. Our estimation results can be summarized into three main empirical findings. First, the government follows a hard budget constraint and soft budget constraint strategies in the case of negative and positive shocks, respectively. Second, negative shocks to the fiscal budget are removed fairly quickly compared to positive shocks. Third, bi-directional causality between revenues and expenditures offers support in favor of the fiscal synchronization hypothesis. The policy implication is that budget deficit’s reduction could be achieved through government spending cut, accompanied by contemporaneous tax controls.

Keywords: Government spending; Government revenue; Hidden cointegration; Fiscal policy; Asymmetry (search for similar items in EconPapers)
JEL-codes: E62 H2 H5 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s10663-017-9375-5 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:empiri:v:45:y:2018:i:3:d:10.1007_s10663-017-9375-5

Ordering information: This journal article can be ordered from
http://www.springer. ... ration/journal/10663

DOI: 10.1007/s10663-017-9375-5

Access Statistics for this article

Empirica is currently edited by Fritz Breuss and Fritz Breuss

More articles in Empirica from Springer, Austrian Institute for Economic Research, Austrian Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().