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The tax-expenditure hypothesis posed by Milton Friedman emphasizes a positive causal relationship between government tax revenues and government expenditures. If citizens do not have a correct perception of the real tax burden and underestimate the price of public goods and services, there is a negative causal relationship between tax revenues and...
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Citations
... In connection with fiscal illusion, other related topics are also frequently discussed. The taxexpenditure hypothesis is examined in Maddah and Farahati (2014). The relationship between the fiscal illusion and cyclicality of government expenditure is analyzed in Abbott and Jones (2016). ...
... In connection with fiscal illusion, other related topics are also frequently discussed. The taxexpenditure hypothesis is examined in Maddah and Farahati (2014). The relationship between the fiscal illusion and cyclicality of government expenditure is analyzed in Abbott and Jones (2016). ...
This paper aims to analysis the macroeconomic (in)stability in four North African countries (Algeria, Egypt, Morocco, and Tunisia) cover-ing the period 1999 to 2018 from the databases of World Bank (WDI). To achieve this purpose, we have modified the Macroeco-nomic Instability Index (MII) by adding a fifth variable to the four variables adopted in the previous economic literature. Also, the study investigates the major factors influencing macroeconomic stability for North African countries. The study uses the panel re-gressing approach especially; the Panel FGLS, which takes into account the fixed and random effects across countries and periods, and Panel FMOLS and DOLS which estimate and illustrate the long-term cointegration relationships. The results of measuring the stabil-ity index for the countries under study correspond to the facts and economic events that these countries witnessed during the study period, especially Egypt and Tunisia. The findings highlight, money supply, exports, and domestic investments have a strong statistical-ly significant relationship with a negative sign while import has strong significant a positive effect on MII. According to the results achieved through standard economic analysis, along with some economic characteristics of North African countries, trade, invest-ment and monetary policy are among the important factors in achieving macroeconomic stability. The study recommends econom-ic policymakers in North African countries must work to enhance foreign trade, benefiting from the geographical location and based on the ingredients had by those countries, while identifying factors that promote exports.
... In connection with fiscal illusion, other related topics are also frequently discussed. The taxexpenditure hypothesis is examined in Maddah and Farahati (2014). The relationship between the fiscal illusion and cyclicality of government expenditure is analyzed in Abbott and Jones (2016). ...
... Paper of Maddah & Frahati (2014) investigates fiscal illusion in Iran Using quarterly data for the period 2001-2012. This In order to achieve this goal, two symmetric and asymmetric error correction models, is estimated. ...
The present study attempted to experimentally analyze the effect of fiscal illusion in the form of Flypaper effect on spending demand levels of provincial governments in Iran. To this aim,theoretical foundations and literature review were presented,and then the model used for investigation was specified. Finally,using time series data for provinces of Iran during 2000-2013 estimation and experimental analysis were performed. In Iran’s economy,the central government award grants to the provincial government which are mainly from oil revenues,so that this type of dedicated revenues to provincial governments were considered as the intergovernmental grant (from central government to the provincial government). The results show that in Iran,flypaper effect will be accepted in the provinces of Iran.
