Revenue and Expenditure Nexus: A Case Study of Romania

Abstract

This study determines the causal relationship between the expenditure and revenue of\ngovernment in the case of Romania by using the autoregressive distributive lag approach to\ncointegration, variance decomposition and rolling regression method. The results indicate that\nbidirectional long run relationship exist between expenditure and revenue of government. The\nvariance decomposition method suggests government revenue shock has more sharply impact\non the government expenditure as compared to the shock in government expenditure and\nresponse of government revenue collection.