Tax‐spend nexus in Greece: are there asymmetries?

The purpose of this paper is to examine the possibility of asymmetries in the budgetary adjustment process.

The paper uses the TAR and MTAR models, set forth by Enders and Siklos, for the period 1957 to 2009.

Short‐run results indicate unidirectional causality from revenues to expenditures. Long‐run results indicate asymmetric responses by both revenues and expenditures to budgetary disequilibria. With respect to asymmetric adjustment, revenues respond only when the budget is improving whereas expenditures respond faster (in absolute terms) to a worsening budget than for an improving budget.

Contrary to other studies, the results presented in the paper lend support for the tax‐spend hypothesis.