The revenues-spending nexus in Romania: a TAR and MTAR approach

Figures & data

Figure 1. Revenues, expenditures and budgetary disequilibrium in Romania for the period 1995–2011.

Table 1. Unit root and cointegration tests for Romania 1999Q1–2012Q1 for Constant, Linear Trend model.

Panel A: unit root tests^a
Variables	ADF	DF-GLS	ZA	Break date
GE	−1.604003	−0.738807	−2.484230	2006Q4
D(GE)	−15.80576***	−1.533604	−19.75169***
GR	−1.958953	−0.765947	−3.420807	2007Q1
D(GR)	−31.15785***	−0.999736	−34.89568***
Panel B: Engle-granger cointegration test^b
Cointegrating equation using DOLS
GR=0.216627 + 0.357337(GE)		ADF
(0.0573)*** (0.13893)**		−6.414333***
Jarque-Bera test for normality: 5.716388
[0.05737]

^a Significant at: ADF critical values are –4.161144, –3.506374 and –3.183002 for 1, 5 and 10% levels respectively; DF-GLS critical values are –3.77, –3.19, and –2.89 for 1, 5 and 10% level respectively; ZA critical values are –5.57, –5.08, and –4.82 for 1%, 5% and 10% levels respectively.

^b Numbers in parenthesis are standard errors of the coefficients adjusted for long-run variance; *, **, and *** denotes significance at 10, 5 and 1% levels, respectively; DOLS model includes deterministic trend. DOLS is the dynamics OLS regression of GE on a constant, a deterministic trend, GR and leads and lags of GR (we choose lead=4 and lag=0 based on SIC criterion keeping max=4); critical values for the ADF cointegration test at the 1, 5 and 10% significance level are –2.618579, –1.948495 and –1.612135, respectively; brackets indicate probability values corresponding to null hypothesis that the residuals are normally distributed; ADF is the augmented Dickey and Fuller (1979) test; DF-GLS is Elliott-Rothenberg-Stock (1996) test; ZA is the Zivot and Andrews (1992) test allowing for an endogenous structural break in the series; proper lag length for ADF, DF-GLS and ZA test were chosen using SIC.

Source: Authors’ calculation.

Table 2. Tests for cointegration and symmetry.

	TAR [k=1]	MTAR [k=1]
Threshold	0	0
ρ1	−3.009***	−2.122**
ρ2	−4.176***	−5.076***
Φμ and	10.606***	13.172***
t(ρ1 = ρ2)	0.8727	4.4739**
Threshold	0.031	−0.028
ρ1	−2.158**	−3.088***
ρ2	−4.814***	−6.043***
Φμ and	11.951***	19.317***
t(ρ1 = ρ2)	2.7604	13.099***

Note: (1) k denotes lag-length which is the number of auxiliary regressors in the TAR and MTAR model and based on SIC and AIC. (2) Φ_μ and are the F-statistics for the null hypothesis of no-cointegration or (ρ₁ = ρ₂ = 0) under the TAR and MTAR specifications respectively. (3) The 5% critical values of Φ_μ is 7.30 for the TAR model and for are 7.96 for the MTAR model (4) t(ρ₁ = ρ₂) is the t-statistics for the test of symmetry. (4) *, ** and *** denotes significance at 10%, 5% and 1% level of significance respectively.

Source: Authors’ calculation.

Table 3. Asymmetric error correction model: MTAR.

Independent variables	Dependent variable: GE	Independent variables	Dependent variable: GR
Constant	0.08175*** [3.730]	Constant	0.08905*** [5.476]
GEt-1^+	−0.35595 [–0.825]	GEt-1^+	−0.48256 [–1.508]
GE t-1^-	0.46900 [1.143]	GE t-1^-	0.74587** [2.451]
GR t-1^+	−0.61987 [–1.643]	GR t-1^+	−0.50506 [–1.804]
GR t-1^-	1.07094** [2.115]	GR t-1^-	1.17792*** [3.135]
Error-correction term		Error-correction term
	−0.88707** [–2.408]	ρ1	−1.20673*** [-4.415]
	−0.49955 [–0.803]	ρ2	−1.76592*** [–3.827]
Summary statistics		Summary statistics
R-squared	0.43		0.72
Adj-R^2	0.35		0.69
F-stat	5.36		18.84
Stat DW	2.23		2.02
AIC/BIC	−135.28/-119.98		−165.14/-149.84
LB(8)	0.00		0.08
LB(12)	0.00		0.08

Source: authors’ calculation.

Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74, 427–431.

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