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An investigation of granger causality between tax revenues and government expenditures

Syed Hasan, Muhammad Subhani () and Amber Osman

MPRA Paper from University Library of Munich, Germany

Abstract: The nexus between government revenue and government expenditure always wins the attention of policy makers and think tanks while they work four making fiscal policies for an economy. This paper is an empirical investigation on the unidirectional causality between government expenditures and the revenues, which government collects from public in shape of various levied taxes. Annual data for Pakistan from the period of 1979 to 2010 for governmental expenditures and its tax revenue have been collected. While, the unidirectional and bidirectional causality were interrogated via applying Granger causality for the outlined variables. The results indicate that there is an uni-directional causality between the expenditures and revenues, which runs from tax revenues to govt. expenditures, that is the previous lags of tax revenue has a causal impact on the current govt. spending.

Keywords: tax revenue; government expenditure; fiscal policy; granger causality; economy (search for similar items in EconPapers)
JEL-codes: E62 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-acc, nep-mac, nep-pbe and nep-pub
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