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

November 1, 2002

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Format: Chicago

Qing Wang, and Ugo Fasano-Filho. Testing the Relationship Between Government Spending and Revenue: Evidence From GCC Countries, (USA: International Monetary Fund, 2002) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Subject: Expenditure, Fiscal policy, Fiscal stance, Oil prices, Oil, gas and mining taxes, Prices, Taxes, Total expenditures

Keywords: Expenditure decision, Expenditure growth, Fiscal policy, Fiscal stance, Gas and mining taxes, GCC countries, GCC country, Global, Government expenditure, Oil, Oil prices, Oil revenue, Revenue, Revenue shock, Spent-revenue hypothesis, Total expenditures, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/201
Stock No:

WPIEA2002201
ISBN:

9781451874365
ISSN:

1018-5941

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