Government Revenues and Expenditures in the East European Economies: A Bootstrap Panel Granger Causality Approach

Abstract

Using a bootstrap panel Granger causality approach, this article investigates the causality between government revenues and government spending from 1995 to 2012 for ten East European economies that are members of the European Union. It finds unidirectional causality from public expenditures to revenues in Bulgaria. For the Czech Republic, Hungary, and Slovenia, government revenues explain expenditures, and a two-way causality exists for the Slovak Republic. No Granger causality is found for Estonia, Latvia, Lithuania, Poland, and Romania.

Keywords:

• bootstrap panel causality
• East European economies
• expenditures
• government
• revenues

JEL Classification:

• H20
• H50
• C22
• C23

ACKNOWLEDGMENTS

The author would like to thank the editor Josef Brada and the anonymous reviewers for their helpful comments. The author also thanks Lázsló Kónya for his support and suggestions offered for the empirical part of this research. Special thanks go to Marcel Voia, Claudiu Albulescu, Dan Danuletiu, Suleyman Bolat, Aviral Tiwari, Stefano Fachin, Richard Connolly, and Jim Alm. Any error or omission in this article is the author’s.

Notes

1. The EU-15 includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Ireland, Luxembourg, the Netherlands, Portugal, Spain, United Kingdom and Sweden. The EU-25 represents the EU-15 countries, Bulgaria, the Czech Republic, Estonia, Hungary, Lithuania, Latvia, Malta, Poland, Slovakia, and Slovenia. The EU-10 refers to Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Portugal, and the United Kingdom. The PIIGS countries are Portugal, Ireland, Italy, Greece, and Spain. United Kingdom decided to leave the European Union in the referendum held on 23 June 2016.

2. The TSP codes used in the bootstrap panel Granger causality approach are offered by the courtesy of Laszlo Kónya.

3. The unit root tests of variables for each country are available upon request.

Additional information

Notes on contributors

Mihai Mutascu

Mihai Mutascu is an associate researcher at the Laboratoire d’Economie d’Orléans (LEO), Faculté de Droit d’Economie et de Gestion, University of Orléans, Orléans, France, and a full professor at the East European Center for Research in Economics and Business (ECREB), Faculty of Economics and Business Administration, West University of Timisoara, Timisoara, Romania.