The long-run relationship between government expenditure and income : evidence from Jordan

Abstract EN

In this study, four versions of Wagners law are examined empirically using Jordanian annual data for the period 1972-2001, The stationarity properties and the order of integration of the data are examined using Augmented Dickey-Fuller tests.

The results based on the co-integration test turn out to provide no support for the validity of Wagner's law.

The Granger-causality between government spending and income is investigated using the standard first difference VAR models.

The results based on these tests provide evidence supporting the short-run dependence of real government spending on real income.

On the other hand, the relationship between nominal government spending and nominal income turn out to support the presence of either feedback effect or unidirectional causality running from government spending to nominal income