The Causal Relationship Between Government Spending and Revenue: An Empirical Study from Greece

Abstract

This paper examines the relationship between government spending and revenues in Greece for the 1980–2015 period, using cointegration autoregressive distributed lag test (ARDL test) as well as causality test developed by Toda and Yamamoto. The results of cointegration of ARDL test showed that there is a cointegrated relationship between government spending and revenues. Also, causality test showed that there is a unidirectional causal relationship between spending and revenues in Greece with direction from government spending toward revenues.