Tax revenues and public investment: Unidirectional or bi-directional causality? Some empirical evidence.

This thesis examines the direction of causality between tax revenues and public investment, using data from the Greek economy. This study applies the methodologies of OLS regression analysis and tests of cointegration to examine the relationship between tax revenues and public investment. In addition, a Vector Autoregressive Model (VAR model) is included in this paper. The empirical results reveal unidirectional causality from tax revenues to public investment which suggests that tax and spending decisions are not made jointly by the Greek fiscal authorities.