Do Revenues or Expenditures Respond to Budgetary Disequilibria?

Baghestani, Hamid; McNown, Robert

doi:10.2307/1059979

Cited by 155 publications

(132 citation statements)

References 24 publications

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“…Kollias and Makrydakis (2000) find evidence for the fiscal synchronization hypothesis using data from Greece and Ireland, Li (2001) offered similar evidence for China, Nyamongo, Sichei, and Schoeman (2007) for South Africa, and Paleologou (2013) for Sweden and Germany, among others. Lastly, empirical evidence for the institutional separation hypothesis, which asserts an independent relationship between government revenues and spending, is provided by Hoover and Sheffrin (1992) for the US after accounting for breaks in the data-set; similar evidence for the US was also found by Baghestani and McNown (1994), and Narayan and Narayan (2006) for the countries which include Ecuador, Guatemala, and Uruguay, among others.…”

Section: Literature Reviewmentioning

confidence: 88%

Fiscal sustainability in the presence of structural breaks: Does overconfidence on resource exports hurt government’s ability to finance debt? Evidence from Nigeria

Aliyu

2016

Cogent Economics & Finance

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Abstract:The sustainability of the Nigerian fiscal deficit along with the role of the dynamics of government revenues and spending in adjusting the size of the deficit is examined using annual data from 1961 to 2014. After allowing for structural breaks, the study finds evidence of a cointegration relation between the government revenues and spending. The results did not indicate the presence of asymmetries in either the threshold autoregression or momentum threshold autoregression specifications of the country's budgetary adjustment process. Interestingly, the size of the long run slope parameter appears to be significantly less than one, thus offering support for the soft budget strategy, which also suggests that the government might face difficulties in financing its debts in the long run. Lastly, the short run and long run Granger causality results, while providing evidence in support of the fiscal synchronization hypothesis, also raise some important issues, particularly on the strength of budget deficit sustainability in the country.

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Section: Literature Reviewmentioning

confidence: 88%

Fiscal sustainability in the presence of structural breaks: Does overconfidence on resource exports hurt government’s ability to finance debt? Evidence from Nigeria

Aliyu

2016

Cogent Economics & Finance

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“…Also, since there is no consensus about the measures of taxes and spending variables in the empirical literature (see for example Baghestani and McNown, 1994), we repeated our analysis using the full sample and replacing the real per capita variables with real total variables and nominal total variables scaled by state output.…”

Section: Robustness Checksmentioning

confidence: 99%

The tax-spending nexus: Evidence from a panel of US state–local governments

2011

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We re-examine the tax-spending nexus using a panel of 50 US state-local government units between 1963 and 1997. We find that, unlike tax revenues, expenditures adjust to revert back to a long-term equilibrium relationship. The evidence on the short-term dynamics is also consistent with the tax-and-spend hypothesis. One implication of this finding is that the size of the government at the state-local level is not determined by expenditure demand, but rather by resource supply. This is consistent with the fact that many US state and local governments operate under constitutional or legislative limitations that seek to constrain deficits. JEL Classification: H71; H72; C33.

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“…2 However, when applying this methodology to quarterly data, Baghestani and McNown (1994) find no evidence for any causal relation between quarterly revenue and expenditure…”

Section: Introductionmentioning

confidence: 98%

“…This approach which assumes that in a representative democratic system, budgetary decisions on taxation and allocation must be made simultaneously by the executive and legislative branches of government suggests that fiscal synchronization is an essential condition for fiscal policy solvency. In contrast, scholars that focus on the institutional separation condition (Baghestani and Mcnown, 1994) emphasize that a government taxation and allocation decisions should be made independently of each other. Alternatively, Friedman (1978) proposes a tax-spend condition in which an increase in tax rates leads to an expansion of government expenditure and consequently worsens the governments budgetary balance, implying that lowering taxes is a necessary condition for eliminating the budget deficit.…”

Section: Introductionmentioning

confidence: 99%

Test of fiscal sustainability and causality hypotheses for Switzerland

Prohl

2010

Swiss J Economics Statistics

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Do Revenues or Expenditures Respond to Budgetary Disequilibria?

Cited by 155 publications

References 24 publications

Fiscal sustainability in the presence of structural breaks: Does overconfidence on resource exports hurt government’s ability to finance debt? Evidence from Nigeria

Fiscal sustainability in the presence of structural breaks: Does overconfidence on resource exports hurt government’s ability to finance debt? Evidence from Nigeria

The tax-spending nexus: Evidence from a panel of US state–local governments

Test of fiscal sustainability and causality hypotheses for Switzerland

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