The Investigating of Causality Relationship and Cointegration between Government Revenue and Expenditure in Iran: IN THE PRESENCE OF STRUCTURAL BREAKS

Document Type : Research Article

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relationship between revenue and government expenditure is an important subject in public economics . there are essentially four schools of thought on the direction of causation between expenditure and revenue. purpose of this study is to investigate Long Run and Causality relationship between revenue and expenditure in covering data 1987- 2011 with using TodaYamamoto approach. The Iranian economy has been subject to a multitude of structural changes during the sample period. Thus, time series properties of the data are first analysed by Zivot-Andrews and Lee Strazicich model. the results indicate that all series are non-stationary at level . but thay are stationary at first difference . the Saikkonen and Luetkephol (2000) and Gregory and Hansen, cointegration approach is employed to determine the long-run Relationship between Expenditure and Government . This cointegration technique accommodates potential structural breaks that could undermine the existence of a long-run relationship between Expenditure and Government Revenue.

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