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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