Asymmetric Causality Relationship Between Public Expenditures and Tax Revenues: Transition Economies Case

The study aims to investigate the causality relationship between public expenditures and tax revenues with Dumitrescu & Hurlin's (2012) panel asymmetric causality analysis for 12 transition economies. Dumitrescu & Hurlin's (2012) asymmetric causality analysis findings determined an asymmetric causality relationship between public expenditures and tax revenues. Accordingly, it was determined that there is a bidirectional causality relationship between the positive components and a unidirectional causality relationship between the negative components from public expenditures to tax revenues. The significance of the findings is that the results for positive and negative shocks differ for transition economies, and it has been determined that the result for positive shocks supports fiscal synchronisation. In contrast, the result for negative shocks supports the expenditure -tax hypothesis.