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Government spending and revenues in Sweden 1722–2011: evidence from hidden cointegration
Kristianstad University, School of Health and Society, Avdelningen för Ekonomi och arbetsliv.ORCID iD: 0000-0003-0447-9349
2017 (English)In: Empirica, ISSN 0340-8744, E-ISSN 1573-6911Article in journal (Refereed) Epub ahead of print
Abstract [en]

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.

Place, publisher, year, edition, pages
2017.
Keyword [en]
Government spending Government revenue Hidden cointegration Fiscal policy Asymmetry
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:hkr:diva-16723DOI: 10.1007/s10663-017-9375-5OAI: oai:DiVA.org:hkr-16723DiVA: diva2:1094816
Available from: 2017-05-11 Created: 2017-05-11 Last updated: 2017-08-10Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • 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