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A Two-Way Empirical Investigation on Economic Growth, Public Revenue and Expenditure for Developed and Developing Countries

Journal: Business and Economics Research Journal (BERJ) (Vol.10, No. 5)

Publication Date:

Authors : ;

Page : 1051-1070

Keywords : Public Revenue and Government Expenditure; Economic Growth; Bootstrap Panel Granger Causality; Wagner’s Law; Displacement Effect;

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Abstract

By focusing on the investigation of long-term, this study aims to examine the relationship between public revenue, government expenditure and economic growth while bearing Wagner's Law, Peacock-Wiseman's Displacement Effect, Classical and Keynesian View on fiscal policy in mind. We employed the bootstrap panel Granger causality methodology to analyze the variables and found different linkages between both revenue and spending versus gross domestic product ratios but also some relations within and vice versa. We took a sample of 22 developing and developed countries which are noticeable with their economic activities in the recent era of globalization for the period of 1985-2017. According to the empirical results, for the growth front; public revenue independent variable is much more related or integrated with the dependent GDP variables for some countries while expenditure is also important as a deterministic factor for some others. On the other hand, for the revenue and expenditure case, the results indicate an evidence of a unilateral relationship for four countries which are supporting spend-tax and one other has bidirectional interaction that associated with fiscal synchronization hypotheses. Conspicuously, triggering affection through government expenditure to revenue and a both-way interaction between public revenue to gross domestic product can be expressed.

Last modified: 2020-01-30 03:38:53