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Languages : en
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Book Description
The purpose of this paper is to investigate the government revenue and government expenditure nexus in the case of Turkey, using monthly data covering the period from January 2004 to September 2010. The paper uses Toda Yamamoto (TY) method and generalized impulse response analysis to determine the causal relationship between these two macroeconomic variables. Granger causality test results based on TY method and generalized impulse response analysis suggest a unidirectional causality running from government revenue to government expenditure. Thus, empirical findings support the tax-spend hypothesis and the policy implication of this finding is that the most appropriate economic policy to reduce budget deficits is to cut taxes.