Journal of Business & Economic Policy

Causality between Spending and Revenue in Case of Greece through Toda and Yamamoto Methodology
Chaido Dritsaki

Abstract
This paper examines the relationship between government spending and revenues in Greece for the period 1980-2015. The Augmented Dickey-Fuller (ADF) and Phillips-Perron tests are employed to examine the order of integration of the variables used in the model. For the long run analysis, ARDL bounds testing approach is used as it was formed by the papers of Pesaran et al. (2001). Causality test using the Toda and Yamamoto (1995) Granger non-causality procedure was employed in order to examine Granger causalities between variables. The results of co-integration of ARDL test showed that there is a co-integrated relationship between government spending and revenues. Also, causality test showed that there is a unidirectional causal relationship between spending and revenues in Greece with direction from government revenues towards spending.

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