Fiscal Sustainability Test in Syria During the period 1980-2018

Abstract

The research aimed to test the existence of Fiscal Sustainability in the Long and Short terms in Syria during the period 1980-2018, and also aimed to test the Causal relationship between Government Revenues and Government Expenditures in Syria during the same period. Johansen Co-integration test, Error Correction Model, and Granger Causality test under Error Correction Model were used. Johansen's test results indicated that there was no long-term Equilibrium relationship between Government Revenues and Expenditures in Syria during the period 1980-2018. Therefore, Fiscal Sustainability is not achieved in Syria in the long term, and the results of the Error Correction Model indicated that there was no Co-integration relationship in any direction between Government Revenues and Government Expenditures, and therefore Fiscal Sustainability is not achieved in Syria in the Short term. Granger's Causality test under the Error Correction Model showed that there was no Short-term Causal relationship between Government Expenditures and Government Revenues in both directions, and therefore the Government can determine Expenditures and revenues levels as required. It can be concluded from these results that the government will not be able to meet its future obligations in light of the currently applied Fiscal Policy. And that the Fiscal Policy applied in Syria during the period 1980-2018 has moved away from Fiscal Sustainability standards, and adjustments are recommended on both the Expenditures and Revenues sides in order to achieve Fiscal Sustainability.