NEED OF THE STUDY

The relationship between government revenue and expenditure has an impact on the budget
deficit. The causal relationship between government revenue and expenditure has remained
an empirically debatable issue in the field of public finance. To obtain the appropriate
financial policy to reduce or remove budget deficit it is necessary to find the relationship
between government revenues and expenditures .It is very important that the government
restore the budget how much is affected from each of the revenues and which one of the
revenues is the most effective. This study is very vital since it prove the size of government,
budget deficit and the structure of taxation and expenditure.

Objectives of the Study

This study will be conducted with a variety of following objectives:

 To Review the finances of U.S., INDIA and CHINA Government.

 To analyze empirically the relationship between government revenues and expenditures.

 To analyses the trends of Government Revenue and Expenditure year 2012- 2016.

 On the basis of Factors to make a compassion among Countries U.S., INDIA and CHINA.

 The Impact of Foreign Direct Investment (FDI) has a positive stimulus towards economic
growth especially of U.S., INDIA and CHINA.

Hypothesis

To examined the concept of causality relationships between government revenue and expenditures
and have come up with four alternative hypotheses to explain this phenomenon. This includes:

1) The Revenue- Spend hypothesis, 2) The Spend-Revenue hypothesis

3) The fiscal synchronization hypothesis, 4). The institutional separation hypothesis
These are briefly reviewed below:

The Revenue-Spend hypothesis: - Government would spend all of its revenues, and
therefore raising government revenues would lead to higher government expenditures. Thus,
a cut or reduction in revenue generation is a necessary policy to keep budget deficit under
control.

The Spend-Revenue hypothesis: - According to this hypothesis, a rise in expenditures leads

to an increase in revenues. In other words, government determines the expenditures first and
then increases taxes / revenues to finance these expenditures..

The fiscal synchronization hypothesis: - The hypothesis further posits that government
determines its expenditures and revenues simultaneously based on the cost benefit analysis of
the planned government programs.

The institutional separation hypothesis: - is an opposite view of the fiscal synchronization

hypothesis. According to this hypothesis, government determines its expenditures and
revenues independently.
Need To frame your Hypothesis for one/ Hypotheses (for more than one)

Ho1: There is no significant difference between the trend of Government Revenue and
Expenditure of selected countries.

Frame more like this

RESEARCH METHODOLOGY:
(a) Research design
The research design for the study will be Descriptive as well as Analytical because it will be carried
out with specific objectives and utilizes the large number of data of selected countries.

(b)Sample size
For attaining different objectives, the followings Countries will be taken for the study purpose:
 U.S.
 INDIA
 CHINA

Justification of Sample Selection:

On the basis of Economy (Capitalist, Socialist and Mixed)

(c)Duration of the study

For the purpose of analysis of data, a period of last four financial year starts from 2012-2013 to 2015-
2016 will be taken in to consideration.

(d)Data Collection
Primary Data: Primary Data will be collected through the interviews from government officials,
academicians and people working in the area.

Secondary Data: Secondary Data will be collected through publications of ministry of finance, IMF,
UNDP, UNESCO website, journals, magazines and books

(e)Statistical Tools

For the data analysis various statistical tools

 Granger causality Model

 Vector Regression Model

  Error Correction Model

In addition to above stated statistical tools the researcher may adopt few other tools during the course
of study.

Frame R.M Objective Wise

S.no Objective 1 R.M (How to achieve this objective)