Page 6 - Working Paper (Analysis of Political Budget Cycles in Emerging South East Asian Economies)
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DDTC Working Paper 0414                                                                                                DDTC Working Paper 0414

                   5. Econometric Results                              As earlier mentioned, the full  sample  period
                                                                    runs from 1985 to 2011. Relationship of variable
                      Figure 1 below illustrates  the relationship   unemployment and binary variable executive
                   between the tax  revenue and its causal  factors.   election are  consistent with previous  empirical
                   These plots are the y-x planes, in which regression   findings.  Meanwhile,  variable  log_government
                   of dependent variable  on each of this factor    expenditure has negative relationship with
                   would determine the line of best fit. Based on the   variable unemployment and positive correlation
                   figure, there are positive relationship between tax   with  household  final  consumption.  This  leads
                   revenue and Real GDP or Cash Surplus; whereas,   to conclusion that  as government  increase their
                   the relationship is reversed between tax revenue   expenditure;  it will  create  multiplier  effects to
                   and unemployment  or household consumption       aggregate income level through several  channels
                   expenditure. Meanwhile Figure 2 demonstrates the   such as an increase in household expenditure and
                   relationships between government expenditure     decrease unemployment.
                   and its causal factors.
                                                                       We also  conduct  other test to make sure the

                                    Figure 1 -  Scatterplot Matrix of Tax Revenue (% of GDP) to Other Variables

                                   Figure 2 -  Scatterplot Matrix of Government Expenditures to Other Variables
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