Is the Thai Government Revenue-Spending Nexus Asymmetric?

Jiranyakul, Komain, (2023), "Is the Thai Government Revenue-Spending Nexus Asymmetric?, Journal of the Asia Pacific Economy, Vol. 82, Issue 2, pp. 404-419.

Posted: 7 Dec 2017 Last revised: 16 Jun 2023

See all articles by Komain Jiranyakul

Komain Jiranyakul

National Institute of Development Administration

Date Written: June 15, 2023

Abstract

Recent evidence suggests that there might be an asymmetric process of adjustment towards the long-run equilibrium in the government revenue-spending nexus. In this paper, the long-run relationship between government revenue and spending is examined in the case of Thailand using annual data over the period 1991-2019. Specifically, this is an attempt to determine whether this long-run relationship is linear or nonlinear. In doing so, both linear and nonlinear cointegration tests are employed. The empirical results suggest that the positive long-run relationship between revenue and spending is linear and stable when revenue is the dependent variable. By estimating the TAR and MTAR models, evidence of a nonlinear revenue-spending relationship is not found. Therefore, there does not seem to be asymmetric adjustment toward the long-run equilibrium. The results of causality tests based on the estimated ECMs of linear cointegrating equations show no causality between revenue and spending in the short run, supporting the fiscal institutional separation hypothesis. In the long run, there is unidirectional causality running from government spending to revenue, which supports the fiscal spend-and-tax hypothesis.

Keywords: Government revenue, government expenditures, unit root, cointegration, structural break, symmetric or asymmetric adjustment, causality

JEL Classification: C32, E62

Suggested Citation

Jiranyakul, Komain, Is the Thai Government Revenue-Spending Nexus Asymmetric? (June 15, 2023). Jiranyakul, Komain, (2023), "Is the Thai Government Revenue-Spending Nexus Asymmetric?, Journal of the Asia Pacific Economy, Vol. 82, Issue 2, pp. 404-419. , Available at SSRN: https://ssrn.com/abstract=3083886 or http://dx.doi.org/10.2139/ssrn.3083886

Komain Jiranyakul (Contact Author)

National Institute of Development Administration ( email )

118 Seri Thai Road
Bangkok, 10240
Thailand

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