Open AccessBudget Balance through Revenue or Spending Adjustment: Evidence from Pakistan
Author(s) -
Nadeem Iqbal,
Wasim Shahid Malik
Publication year - 2010
Publication title -
pakistan development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.154
H-Index - 26
ISSN - 0030-9729
DOI - 10.30541/v49i4iipp.611-630
Subject(s) - economics , government spending , revenue , deficit spending , government revenue , monetary economics , causality (physics) , government (linguistics) , debt , inflation (cosmology) , government budget , budget constraint , tax revenue , macroeconomics , public finance , finance , microeconomics , welfare , market economy , linguistics , philosophy , physics , quantum mechanics , theoretical physics
Government cannot roll over the debt forever (ponzi game isnot allowed). In the long run, inter-temporal budget constraint has tobe satisfied, which is possible either through government spendingadjustment or increasing government revenues. So current budget deficitcalls for adjustment, in the future, in spending or revenues. There arefour hypotheses, in the literature, in this regard: the tax-and-spendinghypothesis, the spending-and-tax hypothesis, bi-directional causalitybetween government revenues and government expenditures, andindependence of taxes and expenditures hypothesis. The last hypothesis,however, have negative implications, in the long run, in terms of debtsustainability and inflation