Budget sustainability in Selangor state

This study investigates the relationship between government revenue (GR) and government expenditure (GE) of Selangor state. This study adopted the annually data from the period 1984 to 2009. The main purpose of this study is to access empirically the fiscal policy regimes in the Selangor State. The fiscal policy of the Selangor state will investigate by using Unit root test, Johansen and Juselius (JJ) cointegration, Dynamic Ordinary Least Squares (DOLS) and Granger causality test the direction of the causality between the variables. We found that, GR and GE of Selangor state was stationary at first different, which is I(1). From the cointegration results showed that Selangor state has long run relationship. The result for DOLS test support that GR and GE of Selangor state is at the sustainable condition. While, for Granger causality test result showed that there is a one-way causation from GR towards GE