Tax-spend, spend-tax, or fiscal synchronization. A wavelet analysis

In this article, we use wavelet methodology to analyse the long-term relationship between spending and taxes. Unlike the standard methodology that utilizes unit roots and cointegration with or without structural breaks, the present method makes it possible to know the long-term evolution of variables (time series) and the possible delay or advance between these variables. Although we limited ourselves to studying the most recent period of 1980-2015, the results obtained reveal various alternatives and nearly perfect synchronization, with revenues perhaps slightly leading spending, which may be the result of recent budget restrictions instated in response to the economic recession.