The Causal Relationship between Government Revenue and Expenditure in Jordan

1
Hussein Ali Al-Zeaud
Hussein Ali Al-Zeaud
1 Al al-Bayt university Mafraq-Jordan

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The main purpose of the study is to examine the causal relationship between government revenues and expenditures of the Jordan government over the period from 1990 to 2011 using Granger causality and VECM tests methodology. Which provides channels of causation between government revenues (GR) and government expenditures (GE).The empirical results show that bidirectional causality running between revenues and expenditure. This result supports lend support to the fiscal synchronization hypothesis, implying that government of Jordan makes its revenues and expenditures decisions simultaneously. On other hand, it shows that allocated expenditures decide the amount of revenues which in turn affects the size of expenditures for the present and the next fiscal year(s).Thus the policy maker should pay attention to the bidirectional causality between government expenditures and revenues which might complicate the government’s efforts to control the budget deficit and may contribute in explaining the high national debt figure.

44 Cites in Articles

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

Hussein Ali Al-Zeaud. 2014. \u201cThe Causal Relationship between Government Revenue and Expenditure in Jordan\u201d. Global Journal of Management and Business Research - B: Economic & Commerce GJMBR-B Volume 14 (GJMBR Volume 14 Issue B6): .

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GJMBR Volume 14 Issue B6
Pg. 49- 57
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Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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October 6, 2014

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English

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The main purpose of the study is to examine the causal relationship between government revenues and expenditures of the Jordan government over the period from 1990 to 2011 using Granger causality and VECM tests methodology. Which provides channels of causation between government revenues (GR) and government expenditures (GE).The empirical results show that bidirectional causality running between revenues and expenditure. This result supports lend support to the fiscal synchronization hypothesis, implying that government of Jordan makes its revenues and expenditures decisions simultaneously. On other hand, it shows that allocated expenditures decide the amount of revenues which in turn affects the size of expenditures for the present and the next fiscal year(s).Thus the policy maker should pay attention to the bidirectional causality between government expenditures and revenues which might complicate the government’s efforts to control the budget deficit and may contribute in explaining the high national debt figure.

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The Causal Relationship between Government Revenue and Expenditure in Jordan

Hussein Ali Al-Zeaud
Hussein Ali Al-Zeaud Al al-Bayt university Mafraq-Jordan

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