Dynamic Interrelation between Aggregated Revenues and Expenditures of Regional-Level Budgets of Federal States: A Time-Frequency Approach to Analysis

Alan K. Karaev; Oksana S. Gorlova; Vadim V. Ponkratov; Margarita L. Vasyunina; Andrey I. Masterov; Hongor N. Zambaev; Lolita H. Gueva

doi:10.48161/qaj.v4n3a549

Authors

Alan K. Karaev Financial University under the Government of the Russian Federation, Moscow, Russian Federation
Oksana S. Gorlova Financial University under the Government of the Russian Federation, Moscow, Russian Federation
Vadim V. Ponkratov Financial University under the Government of the Russian Federation, Moscow, Russian Federation
Margarita L. Vasyunina Financial University under the Government of the Russian Federation, Moscow, Russian Federation
Andrey I. Masterov Financial University under the Government of the Russian Federation, Moscow, Russian Federation
Hongor N. Zambaev Financial University under the Government of the Russian Federation, Moscow, Russian Federation
Lolita H. Gueva Financial University under the Government of the Russian Federation, Moscow, Russian Federation

DOI:

https://doi.org/10.48161/qaj.v4n3a549

Keywords:

regional-level budgets, sustainability of regional budget, fiscal policy, time-frequency dependence, aggregated expenses

Abstract

Objective: The article analyzes the dynamic (time-frequency) relationship between aggregate budget expenditures and revenues of the federal constituent entities, considering four competing theoretical hypotheses: “expenditures-revenues”; “revenues-expenditures”; “fiscal synchronization”; and “fiscal neutrality”, over time (2013:12÷2023:03). Method: The study was conducted using wavelet coherence analysis, which made it possible to separate short-term, medium-term and long-term effects in the dynamic dependence of the analyzed variables, and identify the direction and intensity of this relationship. Finding: The research results indicate the existence of all four relationships between aggregated budget revenues and expenditures of the federal constituent entities for various time periods, on different time scales, throughout the entire observation time interval (2013:12÷2023:03). These findings demonstrate that, to a greater extent, the budgets of the federal constituent entities are characterized by the presence of a dynamic relationship between aggregated revenues and expenditures in the following modes: “revenues-expenditures” (when revenues are ahead of expenditures) and “expenditures-revenues” (when expenditures are ahead of revenues). In addition, the time scale and time range of the emergence of the “fiscal synchronization” and “fiscal neutrality” modes in the relationship between aggregated revenues and expenditures of the federal constituent entities are determined. Implication: The results obtained provide a possible explanation for the contradictory results of numerous studies based on traditional methods and empirical observations over different historical periods, since each of these methods only partially explains a particular mode of the dynamic relationship between revenues and expenditures. The theoretical significance of the study lies in the substantiation that continuous wavelet analysis is a powerful tool for studying the nonlinear relationship between revenues and expenditures, since understanding the causalities between revenues and expenditures on various time scales is significant for choosing measures aimed at maintaining the budget sustainability of the federal constituent entities. The practical significance of the research results is determined by the fact that they can be an essential starting point for determining the necessary fiscal policy measures aimed at increasing the budget sustainability of the federal constituent entities.

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