The Relationship between Government Expenditure and Government Revenue: Evidence From Tanzania 1966-2016.

Mulwafu, Emmanuel Edson (2021) The Relationship between Government Expenditure and Government Revenue: Evidence From Tanzania 1966-2016. Masters thesis, The Open University of Tanzania.

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Abstract

The purpose of this study was to examine the relationship between government expenditure and government revenue in Tanzania by using time series data from period of 1966 to 2016. The main objective of this study was to determine relationship between government expenditure and revenue in Tanzania. The study used descriptive statistics, correlation analysis, Augmented Dickey Fuller Test, Phillips Peron test, granger causality test, correlation matrix regression analysis, serial correlation, error correction model and impulse response function we are techniques used in analysis. The study found that government expenditure is positively correlated with government revenue. Furthermore, the estimated result revealed that the causality runs from revenue to expenditure in Tanzania. There existence of long run relationship between government expenditure and revenue this indicated by granger causality effect must at least run in one direction. The coefficient error correction term found to be negative and statistically significant. The study reveled that government expenditure shock effect to government revenue temporarily increases government revenue. This implies that the increase or decrease of government revenue is also a major factor that determines the number of government expenditure projects every budget in Tanzania. The fiscal policy implication of the relationship between government expenditure and revenue suggests that government should be make sure that government expenditure are reduce, develop and search new sources for collection government revenue in order to achieve a sound fiscal policy in government budget.

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