Government spending and revenues in Sweden 1722–2011: evidence from hidden cointegration

Manuchehr Irandoust

    Forskningsoutput: TidskriftsbidragArtikelPeer review

    19 Citeringar (Scopus)
    7 Nedladdningar (Pure)

    Sammanfattning

    This study examines the long-run causal relationship between government revenues and spending of the Swedish economy over the period 1722–2011. The results based on hidden cointegration technique and a modified version of the Granger non-causality test, show that there exists a long-run and asymmetric relationship between government spending and government revenues. Our estimation results can be summarized into three main empirical findings. First, the government follows a hard budget constraint and soft budget constraint strategies in the case of negative and positive shocks, respectively. Second, negative shocks to the fiscal budget are removed fairly quickly compared to positive shocks. Third, bi-directional causality between revenues and expenditures offers support in favor of the fiscal synchronization hypothesis. The policy implication is that budget deficit’s reduction could be achieved through government spending cut, accompanied by contemporaneous tax controls.

    OriginalspråkEngelska
    Sidor (från-till)543-557
    Antal sidor14
    TidskriftEmpirica
    Volym45
    Nummer3
    DOI
    StatusPublicerad - 2018

    Nationell ämneskategori

    • Ekonomi och näringsliv (502)

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