THE SUSTAINABILITY OF TERENGGANU FISCAL ADJUSTMENT AND DYNAMIC ECONOMICS PERFORMANCE

This study identifies sustainability between expenditure and revenue of the Terengganu state government. Two hypotheses have been proposed to explain the sustainability between expenditure and revenue - spend-revenue hypothesis and revenue-spend hypothesis. To determine those hypotheses, econometrical time-series method consisting of cointegration and vector autoregressive (VAR) tests were applied in this study. The cointegration test results show that there is no long-run stability between revenue and expenditure. However, the results of the VAR tests indicate sustainability between revenue and expenditure does exist. This study concludes that, for the state of Terengganu, spend-revenue hypothesis is relevant. In other words, growth in expenditure influences the growth in total revenue.