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

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Testing the Relationship Between Government Spending and Revenue : Evidence From GCC Countries
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Volume/Issue:
2002/201
Series:
IMF Working Papers
Author(s):
Qing Wang, and Ugo Fasano-Filho
Publisher:
INTERNATIONAL MONETARY FUND
Published Date:
November 2002
DOI:
http://dx.doi.org/10.5089/9781451874365.001
ISBN:
9781451874365
ISSN:
1018-5941
Page:
27
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.
Article

Testing the Relationship Between Government Spending and Revenue

Author(s):
Qing Wang, and Ugo Fasano-Filho
Published Date:
November 2002
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