Prague Economic Papers 2019, 28(6):633-647 | DOI: 10.18267/j.pep.697

The Government Spending-Revenue Nexus in CEE Countries: Some Evidence for Asymmetric Effects

Mesut Karakasa, Taner Turana
a Gebze Technical University, Faculty of Business Administration, Turkey

This paper investigates the government spending-revenue nexus for Croatia, Czechia, Hungary, Poland, Romania and Slovenia by using quarterly data and a nonlinear autoregressive distributed lag (NARDL) approach to cointegration. Our empirical findings support the fiscal synchronization for Slovenia, spend-tax for Czechia, tax-spend for Croatia and Hungary, and institutional separation or fiscal neutrality for Romania and Poland in the long run. Moreover, we find an asymmetric effect for Croatia, Czechia, Hungary and Poland in the long run and for all the countries in the short run. Therefore, our results clearly highlight the importance of asymmetric effects in government spending-revenue nexus. Our findings have some policy implications for these countries, such as providing a better coordination of government spending and revenue decisions and paying attention to the asymmetries.

Keywords: spend-tax, tax-spend, fiscal synchronization, asymmetric effects
JEL classification: E62, H20, H50

Received: September 3, 2017; Accepted: April 30, 2018; Prepublished online: September 18, 2019; Published: December 21, 2019  Show citation

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Karakas, M., & Turan, T. (2019). The Government Spending-Revenue Nexus in CEE Countries: Some Evidence for Asymmetric Effects. Prague Economic Papers, 28(6), 633-647. doi: 10.18267/j.pep.697
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