Journal of Tax Reform
Government Revenues and Government Expenditures, or Fiscal Synchronization: Empirical Evidence from South and Eastern Asia
Wajid Khan 1, 2, Muhammad Yar Khan 3, Anam Javeed 4
1 University of Baltistan, Skardu, Pakistan
2 University of Religions and Denominations, Qom, Iran
3 COMSATS University Islamabad, Punjab, Pakistan
4 University of Wah, Punjab, Pakistan
Abstract
To understand and solve budget deficit problems, some academics propose budgets cuts while some suggest increase in taxes. The purpose of this study is to check the causal relationship among ten countries from two regions, south and eastern Asia, where all countries are developing except, Japan. The relationship is tested among three fiscal variables for the period of twenty-seven years from 1980 to 2017. For analysis purposes, Augmented Dickey Fuller test, Toda and Yamamoto Granger Causality Test and Johnson co-integration tests has been used. The results reveal three co-integrating effects for, Bangladesh and Mongolia, two for India and Japan, one for Sri Lanka, Nepal, China, South Korea, North Korea, while non for Pakistan. The Toda and Yamamoto Granger causality tests reveal evidence of tax-and-spend hypothesis for China, Pakistan, and Nepal. For Nepal, we found support for spend-and-tax hypothesis. There is evidence of neutrality for Japan, South Korea, North Korea, Mongolia, India, Sri Lanka, and Bangladesh. The results validate that south and eastern Asian countries tax policies have lessor impact to reduce budget deficits and do not offer permanent solution for fiscal problems. Our findings support increase in taxes may be a good solution to budget deficit problem, but it can be reduced if revenues and expenditures are controlled simultaneously. Major policy implications include, raising tax rates in nations like China, Pakistan, and Nepal, to increase revenue and strengthen fiscal sustainability, the significance of government spending reduction as a key tactic for managing budget imbalances, the importance of balancing both revenue generation and expenditure and flexibility in approach and continual monitoring of fiscal indicators.
Keywords
budget deficits; government revenues; government expenditures; fiscal synchronization; Johnson Co-integration; South and Eastern Asia
JEL classification
C32; E62; H20; H50References
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About Authors
Wajid Khan – PhD, Department of Business Management and Commerce, University of Baltistan, Skardu, Pakistan (Kargil-Skardu Rd, Hussainabad, Skardu, 16400); Department of Media Management, University of Religions and Denominations, Qom, Iran (Qom Province, Qom, 37491 13357, Iran). ORCID: https://orcid.org/0000-0001-9600-3721; e-mail: wajiduomm@gmail.com
Muhammad Yar Khan– PhD, Tenured Associate Professor, Department of Management Sciences, COMSATS University Islamabad, Punjab, Pakistan (Wah Campus GT Road Wah Cantt, Punjab, Pakistan 47040). ORCID: https://orcid.org/0000-0003-0731-9260; e-mail: muhammadyar@ciitwah.edu.pk
Anam Javeed – PhD, Assistant Professor, Department of Management Science, University of Wah, Punjab, Pakistan (GT Road, Wah Cantt, Punjab, Pakistan 47040). ORCID: https://orcid.org/0000-0002-9571-4158; e-mail: dr.anam.javeed@uow.edu.pk
For citation
Khan W., Yar Khan M., Javeed A. Government Revenues and Government Expenditures, or Fiscal Synchronization: Empirical Evidence from South and Eastern Asia. Journal of Tax Reform. 2023;9(3):317–329. doi.org/10.15826/jtr.2023.9.3.144
Article info
Received October 19, 2023; Revised November 16, 2023; Accepted November 19, 2023
DOI: https://doi.org/10.15826/jtr.2023.9.3.144
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