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Investigation of the time-dependent dynamics between government revenue and expenditure in China: a wavelet approach
Linnaeus University, School of Business and Economics, Department of Economics and Statistics.
2019 (English)In: Journal of the Asia Pacific Economy, ISSN 1354-7860, E-ISSN 1469-9648Article in journal (Refereed) Epub ahead of print
Abstract [en]

Unlike previous studies on causal relationships between government revenue and expenditures in China, this study takes into consideration structural breaks in the data by performing wavelet decomposition prior to testing for Granger causality between the fiscal components. The use of wavelet decomposition is motivated by economic theories, which suggest allowing for different budgetary considerations at different time horizons, as well as by the existence of special properties in the data in the form of unit roots and structural breaks. The results from the Granger causality test when using the wavelet-decomposed quarterly data over the period 1980–2015 indicate that government revenue Granger-causes government expenditure (tax-and-spend hypothesis) in the wavelet scales of two to four quarters. The results also show that bidirectional causality (fiscal synchronisation) exists in the wavelet scale of eight to sixteen quarters. Understanding the causal relationships between revenue and expenditure at different time scales is important for formulating relevant policy measures in order to maintain fiscal sustainability in China.

Place, publisher, year, edition, pages
Taylor & Francis Group, 2019.
Keywords [en]
Government revenue, government expenditure, fiscal sustainability, Granger causality, wavelet analysis
National Category
Economics
Research subject
Economy, Economics
Identifiers
URN: urn:nbn:se:lnu:diva-87090DOI: 10.1080/13547860.2019.1646573ISI: 000480163000001OAI: oai:DiVA.org:lnu-87090DiVA, id: diva2:1340324
Available from: 2019-08-05 Created: 2019-08-05 Last updated: 2019-11-26

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Karlsson, Hyunjoo Kim

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CiteExportLink to record
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Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf