Causality between Tax Revenue and Expenditure in case of Pakistan through Toda Yamamoto Methodology

Ghumro Niaz Hussain, S. Rajper, P.A. Memon


The study investigates the actual causal partnership between federal expenditure and federal revenue inside Pakistan by employing Toda-Yamamoto methodology for the period, 1972 to 2014. This statistical methodology opens an additional channel for causation between the government total revenues (LFTR) and expenditures (LFEXP). The empirical upshots reveal the existence of unidirectional causality running from (LFEXP) expenditures to (LFTR) revenues (“spend–revenue” hypothesis). It is suggested to concern authorities the preference of controlling or reducing expenditures.


Tax revenue, Expenditure, Granger Causality, Toda-Yamamoto Model.

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