An empirical investigation of the relationship between government revenue and expenditure : the case of the Fiji Islands

Gounder, Neelesh, Narayan, Paresh Kumar and Prasad, Arti 2007, An empirical investigation of the relationship between government revenue and expenditure : the case of the Fiji Islands, International journal of social economics, vol. 34, no. 4, pp. 147-158, doi: 10.1108/03068290710726711.

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Title An empirical investigation of the relationship between government revenue and expenditure : the case of the Fiji Islands
Author(s) Gounder, Neelesh
Narayan, Paresh KumarORCID iD for Narayan, Paresh Kumar
Prasad, Arti
Journal name International journal of social economics
Volume number 34
Issue number 4
Start page 147
End page 158
Publisher Emerald
Place of publication Bingley, England
Publication date 2007
ISSN 0306-8293
Keyword(s) government
capital expenditure
public revenue
Summary Purpose – Understanding the relationship between government revenue and government expenditure is important from a policy point of view, especially for a country like Fiji, which is suffering from persistent budget deficits. The aim of this paper is to investigate the relationship between government revenue and expenditure for Fiji.

Design/methodology/approach –
The Johansen test for cointegration and Granger causality test are used to conduct the empirical analysis.

Findings – The key findings are that: government revenue and government expenditure in both the aggregate and disaggregate sense are cointegrated; in the short-run government expenditure Granger causes government revenue in an aggregate sense, departmental expenditure Granger causes aggregate revenue, and there is bidirectional causality running between government expenditure and customs duties; and in the long-run there is evidence of fiscal synchronization, implying that expenditure decisions are not made in isolation from revenue decisions.

Research limitations/implications – This fiscal synchronization has not been able curb the current account deficit in Fiji. Moreover, the confirmation of the spend-tax attitude of the government does not bode well for the level of investments and skilled human capital in Fiji as this may perpetuate tax increases in the future. Given that the Fiji Government is currently trying to rein in the escalating level of fiscal deficit, it is an opportune time for them to engage in extensive expenditure reforms.

Originality/value – The findings of this paper should allow policy makers to make informed decisions. Furthermore, the paper is different from others because apart from examining the revenue and expenditure in an aggregate sense, it also considers the different components of revenue and expenditure.
Language eng
DOI 10.1108/03068290710726711
Field of Research 140299 Applied Economics not elsewhere classified
HERDC Research category C1.1 Refereed article in a scholarly journal
HERDC collection year 2006
Copyright notice ©2007, Emerald Group Publishing Ltd
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Document type: Journal Article
Collections: Faculty of Business and Law
School of Accounting, Economics and Finance
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