The main objective of this study is to examine the causal relationship between revenue and spending by using the state goverment data in Malaysia. In this study, we will utilize the time series econometric technique such as johansen cointegration analysis and vector error correction model (VECM). In addition, the panel data methodology also will be use to test the validity of the budget hypothesis. according to prior studies, there are hypotheses to explain the relationship between revenue and spending such as (1) spend-revenue hypothesis, (2) revenue spend hypothesis and (3) bi-directional causality hypothesis which support the fiscal synchronization hypothesis. Based on empirical evidence, we can concluded that the result on the direction of causation are mixed : (a) for kedah,melaka,Pahang, Perak, Sabah, Sarawak, and terengganu we find support the tax-and-spend hypothesis (spend-revenue hypothesis); (b) Selangor and Negeri Sembilan are in conformity with the existence of bi-directional causality or support (the fiskal synchronization hypothesis); (c) for perlis we find the existence of spend-revenue hypothesis; and (d) for other states such as johor, Kelantan and pulau pinang there is evidence of neutrality which states that no causal relationship between both fiscal variables. In addition, the result for panel data technique show that the important role of revenue to influence the state goverment spending. These findings also support the revenue-spend hypothesis.<\/p>\n","protected":false},"template":"","tags":[],"jel-code":[],"article-type":[1329],"class_list":["entry","author-jem","post-3989","article","type-article","status-publish","article-type-normal-article"],"yoast_head":"\n