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Revenue, Expenditure and Causality: An Empirical study of State Government in India Singh Kanchan Online published on 25 September, 2017. Abstract Using the annual data from 1980–2014, this paper attempts to test the causal relationship between total expenditure and total revenue of state government in India within the empirical framework of causality, co integration and error correction mechanism. During the period 1980–2014, this study finds support for a long run relationship between expenditure and revenue following spend-tax hypothesis. However, this study finds evidences of a unidirectional causality from expenditure to revenue thereby invalidating the fiscal synchronization hypothesis, tax-spend hypothesis and institutional hypothesis in state government during the study period. This hypothesis suggests that the unsustainable fiscal imbalances can be mitigated by policies that adjusted government expenditure. Top Keywords Revenue, Expenditure, Causality, Co integration, Error Correction Mechanism. Top | |
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