The Government Revenue–Expenditure Nexus in Southeast Europe: A Bootstrap Panel Granger-Causality Approach

Abstract

This article presents one of the first attempts to explore the relationship between government revenues and government expenditures in six Southeast European countries for the period 1999–2015, employing a bootstrap panel Granger-causality approach, which provides insight into the nature and direction of their relationship in each country. The empirical results indicate a unidirectional relationship from government revenues to government expenditures in five countries (Albania, Bulgaria, Croatia, Serbia, and Slovenia), confirming the revenue-expenditure or tax-spend hypothesis. The findings offer support for the fiscal synchronization hypothesis only in Macedonia, where bidirectional causality between government revenues and government expenditures was found.