Testing the Relationship between Government Spending and Revenue: Evidence from GCC Countries

 
Author/Editor: Fasano-Filho, Ugo ; Wang, Qing
 
Publication Date: November 01, 2002
 
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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(s): Government expenditures | Revenues | Fiscal policy | Cooperation Council for the Arab States of the Gulf

Author's Keyword(s): Fiscal policy | GCC countries
 
English
Publication Date: November 01, 2002
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA2002201 Pages: 27
Price:
US$15.00 (Academic Rate:
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