The Causal Relationship Between Government Expenditure and Revenue: The Case of Switzerland

This article studies the causality link between government expenditure and revenue at federal, state and local levels in Switzerland. It attempts to gather empirical evidence regarding the question of whether the government pursues a "tax and spend" or "spend and tax" policy. The Granger and Hsiao causality tests are applied to data covering the period 1950-1992. The general evidence turns out to be in favor of a causality running from revenue to expenditure.