Testing the Relationship Between Government Spending and Revenue : Evidence From GCC Countries

Author/Editor:

Qing Wang ; Ugo Fasano-Filho

Publication Date:

November 1, 2002

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The paper examines the direction of causality between total government expenditure and revenue in oil-dependent GCC countries by utilizing a cointegration and error-correction modeling framework, and by calculating a variance decomposition analysis. In addition, it presents impulse responses to shed light on the dynamic relation of expenditure to a revenue shock. The results confirm expectations that government spending follows oil revenue, suggesting a pro-cyclical expenditure policy to variations in oil revenue. To make budget expenditure less driven by revenue availability, the authorities could resort to a medium-term expenditure framework, so that expenditures can be planned and insulated from volatile short-term revenue availability.

Series:

Working Paper No.02/201

Subject:

English

Publication Date:

November 1, 2002

ISBN/ISSN:

9781451874365/1018-5941

Stock No:

WPIEA2002201

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

27

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