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Yashobanta Parida
''Causal Link between Central Government Revenue and Expenditure: Evidence for India''
( 2012, Vol. 32 No.4 )
This paper attempts to analyze the causal relationship between central government revenue and expenditure for India using annual data over the period 1970-2010. The Johansen cointegration test suggests that there is a long-run relationship among the variables. The result from Granger causality test based on Vector Error Correction Models (VECM) suggests unidirectional causality from expenditure to revenue in the long-run supporting Spend-and-Tax hypothesis. The short-run Granger causality test based on WALD test restriction suggests that there is no causal relationship between the variables.
Keywords: Revenue, Expenditure, fiscal Deficit
JEL: H5 - National Government Expenditures and Related Policies National Government Expenditures and Related Policies: General
C5 - Econometric Modeling: General
Manuscript Received : Jun 29 2012 Manuscript Accepted : Oct 09 2012

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