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Government Revenues and Expenditures in Guinea-Bissau: Causality and Cointegration

2004; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.574143

1556-5068

Francisco Carneiro, Joao Ricardo Faria, Boubacar Sid Barry,

Monetary Policy and Economic Impact

The paper establishes empirically the temporal causality and long run relationship between government expenditures and government revenues for the case of Guinea-Bissau - a low income country under stress (LICUS) in Africa. A simple macroeconomic model is developed to lay out the hypothesis of a spend-tax behavior in the country's public finances management system. Empirical validation is carried out by means of a traditional Granger-causality test and the estimation of a simple error correction model between expenditures and revenues.