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Analysis of Asymmetries in the Tax-Spending Nexus in Burundi

Journal of Economics and Political Economy

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Title Analysis of Asymmetries in the Tax-Spending Nexus in Burundi
 
Creator NDORICIMPA, Arcade; Faculty of Economics and Management, University of Burundi
 
Subject Spending; Taxes; Grants; Threshold Cointegration; Asymmetric ECM, Burundi
C32; E32; H20; H50; H62.
 
Description Abstract. This study examines the asymmetries in the tax-spending nexus for Burundi using a three-variable model. The study employs a threshold cointegration test with asymmetric adjustment advanced by Enders & Siklos (2001). The findings indicate that government spending, taxes and grants are cointegrated with asymmetric adjustment. Causality tests from the estimated asymmetric error correction model suggest that in the short run there is an independent relationship between government spending and taxes in Burundi. Pertaining to the impact of grants, the results show that grants encourage the government of Burundi to spend more, but, conversely, they also discourage tax revenue, which is known as the tax displacement hypothesis. The findings further show that only government spending responds to budgetary disequilibrium, and this occurs when the budget situation is worsening. This implies that in Burundi, to restore the equilibrium when the budget situation is worsening, the adjustment is made by reducing spending. A policy intuition arising from this study is that, to reduce budget deficits, Burundi should reduce its grant-dependence and improve its tax collection system as well as cut its spending in sectors where it is not productive and reallocate it to more productive sectors.Keywords. Burundi, Spending, Taxes, Grants, Threshold cointegration, Asymmetric ECM.JEL. C32, E32, H20, H50, H62.
 
Publisher Journal of Economics and Political Economy
Journal of Economics and Political Economy
 
Contributor African Economic Research Consortium
 
Date 2017-02-24
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
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Format application/pdf
 
Identifier http://www.kspjournals.org/index.php/JEPE/article/view/1160
10.1453/jepe.v4i1.1160
 
Source Journal of Economics and Political Economy; Vol 4, No 1 (2017): March; 53-70
Journal of Economics and Political Economy; Vol 4, No 1 (2017): March; 53-70
2148-8347
 
Language eng
 
Relation http://www.kspjournals.org/index.php/JEPE/article/view/1160/1174
http://www.kspjournals.org/index.php/JEPE/article/downloadSuppFile/1160/515
http://www.kspjournals.org/index.php/JEPE/article/downloadSuppFile/1160/516
http://www.kspjournals.org/index.php/JEPE/article/downloadSuppFile/1160/517
 
Rights Copyright (c) 2017 Journal of Economics and Political Economy
http://creativecommons.org/licenses/by-nc/4.0