British Journal of Economics, Finance and Management Sciences, vol.8, no.2, pp.62-75, 2013 (Refereed Journals of Other Institutions)
This study aims to find the direction of linkage between government expenditure (GE) and its revenue (GR) applying econometrics in time-series techniques covering the annual data over the period of 1924 and 2011. The final result of this study exerts that there is unidirectional causality running from GE to GR, and supports spending-led revenue hypothesis. In detail, ADF unit root test indicates that both timeseries data are non-stationary at their levels, but become stationary series at their first differences. The Johansen co-integration test shows that long-run equilibrium exists between GE and GR, and the effect is statistically and economically significant. Granger causality test exhibits that there is a unidirectional causality from government expenditure to government revenue.