Re-Examining Government Revenues, Government Spending And Economic Growth In GCC Countries

Abstract

The aim of this paper is to examine the inter-temporal relationship between government revenues and expenditures within a trivariate framework by modeling them together with gross domestic product. Our sample is based on a panel of 6 countries of the Gulf Cooperation Council (GCC) i.e. Saudi Arabia, Kuwait, United Arab Emirates, Qatar, Oman and Bahrain, for the period from 1990 to 2010. We perform an econometric model based on the Toda and Yamamoto procedure. Our empirical results show that government expenditures Granger cause government revenues for Qatar and the United Arab Emirates only, while government revenues Granger cause government expenditures for Saudi Arabia only. We also found a unidirectional causality running from government expenditures to GDP in Bahrain only. Regarding Kuwait, Qatar and Saudi Arabia, GDP Granger cause government revenues while GDP Granger cause government expenditures for Oman and Qatar.