ANALYZING CAUSALITY BETWEEN ROMANIA’S PUBLIC BUDGET EXPENDITURES AND REVENUES

Establishing the relationship between public revenues and expenditures represents a debated issue among economists. The correlation between the two variables is significant for identifying and explaining public budget inbalance and for assessing sustainability of fiscal and budgetary policies. The aim of this study is to analyze the causality between budgetary revenues and expenditures on Romania’s case. Applying Granger causality tests reveals the fact that the dynamic of budgetary expenditures is caused by budgetary revenues, which, also, implies the existence of error correction mechanisms for fiscal imbalances.