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International Journal of Business and Economics

International Journal of Business and Economics
Volume 1, No. 2

August, 2002
 
Tax or Spend, What Causes What: Taiwan's Experience
 
Tsangyao Chang
Department of Economics, Feng Chia University, Taiwan
 
Yuan-Hong Ho
Department of Public Finance, Feng Chia University, Taiwan
 
Abstract
In this paper we tested the hypothesis of tax-and-spend, spend-and-tax, or fiscal synchronization for Taiwan using annual data covering the 1967 to 1999 period. Granger causality test results based on the corresponding vector error-correction models (ECM) suggest unidirectional causality running from government revenues to government expenditures, thus supporting the tax-and-spend hypothesis for Taiwan.
 
Keywords: tax-and-spend, spend-and-tax, fiscal synchronization, Taiwan.
 
JEL Classifications:C32, H62.
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