The Causal Link between Government Expenditure and Government Revenue in Ghana
Journal Title: Asian Economic and Financial Review - Year 2012, Vol 2, Issue 2
Abstract
The study aimed at determining the causal link between government expenditure and government revenue of Ghana over the period 1960 to 2007. Four hypotheses were tested namely: tax-spend hypothesis, spend-tax hypothesis, fiscal synchronization hypothesis and institutional separation hypothesis. The data was obtained from World Bank development indicators’ and the state of the Ghanaian economy. The study employed Granger causality test, augmented Dickey and Fuller (ADF) and Phillip-Perron (PP) tests to examine the causal link between government expenditure and revenue of Ghana. The result shows that there is bi-directional causality such that both government expenditure and government revenue of Ghana have temporal precedence over each other. This means that changes in government revenue precede changes in government expenditure. In order to ensure that expenditure do not move too far away from revenue, the tax net of Ghana should be expanded to capture all “taxable” individuals and firms to increase government revenue.
Authors and Affiliations
Richard Doh-Nani| Department of Economics, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana, Dadson Awunyo-Vitor| Department of Agricultural Economics and Agribusiness, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana
Keywords
Related Articles
- EP ID EP1781
- DOI -
- Views 631
- Downloads 34
CAPITAL INFLOWS AND ASSET PRICES: THE RECENT EVIDENCE OF SELECTED EAST ASIAN ECONOMIES
This paper aims at providing empirical evidence on the relationship between capital inflows and asset prices, focusing on China, Hong Kong, Indonesia, Korea and Thailand. Main findings are: the positive responses of shar...
THE EFFECTS OF FIRM SPECIFIC FACTORS AND MACROECONOMICS ON PROFITABILITY OF PROPERTY-LIABILITY INSURANCE INDUSTRY IN TAIWAN
This article investigates the relationship between firm specific factors and macroeconomics on profitability in Taiwanese property-liability insurance industry using the panel data over the1999 through 2009 time period....
THE CAPITAL INVESTMENT DECISION UNDER INFLATION IN VIETNAM: A CASE STUDY
Inflation and its adverse impacts on the economy are attacking Vietnamese enterprises at two-digit level at present. The managers need the effective foreseeing tools to prepare their budget to be suit to the complex evol...
NONLINEAR ANALYSIS OF ECONOMIC GROWTH, PUBLIC DEBT AND POLICY TOOLS
This paper empirically analyzes the nonlinear relation between real GDP growth per capital and public debt by employing ADL test for threshold cointegration method. Empirical results show that there exists a threshold co...
RELATIONSHIP BETWEEN TOURISM AND ECONOMIC GROWTH: A PANEL GRANGER CAUSALITY APPROACH
This paper investigated the causal relationship between tourism revenue and gross domestic product (GDP) using the panel data of 135 countries for the period 1995–2008. For this purpose, Panel Granger causality analysis...