The Causal Link between Spending and Revenue: The Lao PDR

Phouthanouphet Saysombath, Phouphet Kyophilavong

Abstract


With this paper, we investigate the link between spending and revenue for the Lao PDR during the period of 1980 to 2010. We apply an approach that uses cointegration and an autoregressive distributed lag (ARDL) combined with a Granger causality within a vector error correction framework (VECM). The results disclose that a long-run causality exists between government spending and revenue. This causality is unidirectional from spending to revenue, which supports the spend-and-tax hypothesis. Our results can help policy makers determine whether government spending is primarily the outcome of an increase in tax revenue necessary to finance the spending.

Full Text: PDF DOI: 10.5539/ijef.v5n10p111

Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.

International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

Copyright © Canadian Center of Science and Education

To make sure that you can receive messages from us, please add the 'ccsenet.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.