The paper examines the temporal relationship between revenues and expenditures for the four southern states during 1980 to 2005. Using an error-correction model and Granger causality test, it finds that the taxspend hypothesis is supported by the analsysis. The spend-tax hypothesis is valid for Karnataka; fiscal synchronization hypothesis is supported for Andhra Pradesh and Kerala, while the data for Tamil Nadu failed to show any causality.
REVENUE-EXPENDITURE NEXUS FOR SOUTHERN STATES: SOME POLICY ORIENTED ECONOMETRIC OBSERVATIONS
WORKING PAPER 48/2009