The relationship between revenue and expenditure in modern Japan: A wavelet-based analysis of 150 years

Yu Wang and Nagatomi Hirayama

The Japanese Political Economy, 2025, vol. 51, issue 3, 357-370

Abstract: This study reevaluates the relationship between Japanese government revenue and expenditure from a time-frequency standpoint. Specifically, we employ the wavelet-based Granger test within the period from 1870 to 2019. Our findings demonstrate bilateral positive effects between government income and spending. Consequently, both the tax-spend and spend-tax hypotheses are affirmed in modern Japan. However, the prevailing pattern over time has shifted from tax-spend to spend-tax. Given the predominant focus of prior studies on the postwar era employing time-domain approaches, our analysis presents a comprehensive perspective encompassing diverse time-frequency combinations. We discuss the implications of this research in the concluding section.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:mes:jpneco:v:51:y:2025:i:3:p:357-370

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DOI: 10.1080/2329194X.2025.2552381

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