Co-movement of national income and public spending: a cointegration analysis for Mexico (1993-2017)

Abstract

This study established a long term cointegration equilibrum between national income and government consumption in Mexico for the period 1993 – 2017 using the Johansen procedure. Previously, time series were assesed individually to demonstrate stationarity using ADF, ADF-GLS and Phillip-Perron criteria. Afterwards, the Breitung-Candelon test showed that bi-variate Granger causality was found between these two times series for the first time in a study for Mexico. Finally, using the normalized integration equation parameters and an elasticity criteria widely used in the literature, neither Keynes hypothesis not Wagner hypothesis were validated for Mexico for the study period.