Government size and economic growth in African emerging economies: does the BARS curve exist?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lindokuhle Talent Zungu ◽  
Lorraine Greyling
Keyword(s):  
Economic Growth ◽  
Lagrange Multiplier ◽  
Emerging Economies ◽  
Government Expenditure ◽  
Threshold Level ◽  
Smooth Transition ◽  
Content Type ◽  
Lm Test ◽  
The Government ◽  
Linearity Test

PurposeThis study is aimed at testing the validity of the BARS theory and determining the threshold level at which excessive government expenditure hampers growth. The data from 10 African emerging economies from 1988 to 2019 were used.Design/methodology/approachThe methodology comprises several different stages. In the first stage, an Lagrange Multiplier (LM) type test was employed to find the appropriate transition variable among all the candidate variables to assess the linearity between government expenditure and economic growth and to find the sequence for selecting the order m of the transition function. The linearity test helped to identify the nature of the relationships between government expenditure and economic growth. In the second stage, the model evaluation was tested using the wild cluster bootstrap-Lagrange Multiplier (WCL-LM) test to assess appropriateness of the model. Thirdly, the Panel smooth transition regression (PSTR) model with one regime was estimated to test the validity of the BARS curve.FindingsThe results revealed evidence of nonlinear effects between government expenditure and economic growth, where the size of the government spending was found to be a 27.84% share of GDP, above which government expenditure caused growth to decline in African emerging economies. The findings combined into an inverted U-shape relationship, in line with the BARS theory.Originality/valueThis study proposes that policy-makers ought to formulate prudent fiscal policies that encourage expenditure, which would improve growth for selected countries as their current level of spending is below the threshold. This might be done through: (1) a suitable investment portfolio and (2) spending more on infrastructure.

Economic growth and income inequality: a non-linear econometrics analysis of the SADC region, 1990–2015

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lindokuhle Talent Zungu ◽  
Lorraine Greyling ◽  
Nkanyiso Mbatha
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Threshold Level ◽  
Transition Function ◽  
Smooth Transition ◽  
Lower Growth ◽  
Content Type ◽  
Job Opportunities ◽  
Lm Test ◽  
Smooth Transition Regression

PurposeThe authors investigate the growth–inequality relationship, using panel data from 13 Southern African Development Community (SADC) countries over the period 1990–2015, to test the validity of the Kuznets and Tribble theories. Furthermore, the authors seek to determine the threshold level at which excessive growth hampers inequality.Design/methodology/approachThe panel smooth transition regression (PSTR) model has several stages. The authors applied the Lagrange multiplier (LM) test to find the appropriate transition variable amongst all candidate variables, to assess the linearity between economic growth and income inequality and to find the sequence for selecting the order m of the transition function. The authors then estimated the PSTR model, but before facilitating the results, the authors first used the wild cluster bootstrap (WCB)–LM-type test to assess the appropriateness of the selected transition.FindingsThe authors found that at lower growth, income inequality tends to be lower, while if growth increases above US$8,969, inequality tends to increase in the SADC region. The findings combine into a U-shaped relationship, contradicting the Kuznets and Tribble theories.Originality/valueThe contribution of this paper is that it becomes the first to provide the threshold level at which excessive growth increases inequality in the selected countries. This study proposes that policymakers should focus on activities aimed at stimulating growth, in other words, activities such as spending more on infrastructure, drawing up a suitable investment portfolio and spending on technological investment for countries that are below US$8,969. An improvement in these activities will create job opportunities, which in turn will add to economic growth and thus lead to lower income inequality and better social cohesion.

Government expenditure and economic growth in the European Union countries

2018 ◽  
Vol 45 (2) ◽  
pp. 372-386 ◽  
Author(s):  
Gitana Dudzevičiūtė ◽  
Agnė Šimelytė ◽  
Aušra Liučvaitienė
Keyword(s):  
Economic Growth ◽  
European Union ◽  
Government Spending ◽  
Government Expenditure ◽  
The European Union ◽  
Policy Makers ◽  
Content Type ◽  
Eu Countries ◽  
The Government ◽  
The Relationship

Purpose The purpose of this paper is to provide more reliable estimates of the relationship between government spending and economic growth in the European Union (EU) during the period of 1995-2015. Design/methodology/approach The methodology consisted of several different stages. In the first stage for an assessment of dynamics of government spending and economic growth indicators over two decades, descriptive statistics analysis was employed. Correlation analysis helped to identify the relationships between government expenditures (GEs) and economic growth. In the third stage, for modeling the relationship and the estimation of causality between GE and economic growth, Granger causality testing was applied. Findings The research indicated that eight EU countries have a significant relationship between government spending and economic growth. Research limitations/implications This study has been bounded by general GE and economic growth only. The breakdowns of general GE on the basis of the activities they support have not been considered in this paper, which is the main limitation of the research. Despite the limitation, it might be maintained that the research highlights key relationships in the EU countries. Originality/value These insights might be useful for policy makers. In countries with unidirectional causality running from GE to economic growth, the government can employ expenditure as a factor for growth. The governments should ensure that resources are properly managed and efficiently allocated to accelerate economic growth in the countries with unidirectional causality from GDP to GE.

scholarly journals Do government expenditures and institutions drive growth? Evidence from developed and developing economies

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Noor Zahirah Mohd Sidek ◽  
Mehmet Asutay
Keyword(s):  
Economic Growth ◽  
Government Expenditure ◽  
Institutional Quality ◽  
Institutional Factors ◽  
Government Expenditures ◽  
Government Consumption ◽  
Content Type ◽  
Consumption Expenditures ◽  
Long Run ◽  
The Government

Purpose Most empirical studies on the government expenditure-economic growth nexus suggest a negative relationship between the size of the government expenditures and economic growth especially government consumption expenditures. Given these findings, the government should focus on development expenditures and reduce non-development expenditures for higher economic growth. However, the authors argue that this may not be the case, as government consumption expenditures along with better institutional quality promote growth via reduced corruption, reduction of political risks and good governance. The purpose of this study is to provide empirical evidences that both government consumption and development expenditure promote growth in the presence of better institutional quality. Design/methodology/approach This paper re-examines the impact of government expenditures on growth whilst controlling institutional factors for a sample of 30 developed and 91 developing countries from 1984 to 2017. Government expenditure is segregated into consumption and development expenditures. Findings The results are consistent with existing findings where government consumption expenditures have a negative effect on growth and government development expenditures contribute positively towards growth. However, when the authors conditioned government consumption expenditures with institutional variables, results suggest that in the presence of good institutions, both government consumption and development expenditures promote growth. Practical implications The findings in this paper suggest that in the presence of good institutions, government consumption expenditures will contribute positively towards growth. The results are relatively consistent for both developing and developed economies, which suggests the importance of institutional factors leading to a parallel movement towards long run growth path. In other words, long run economic growth is driven by a similar institutional environment. Originality/value Both developed and developing countries show similar reactions towards consumption and development expenditures. This indicates that despite the level of development, government expenditures do contribute positively towards growth especially in the presence of better-quality institutions.

Australian central bank holds rate as growth slips

2021 ◽  
Keyword(s):  
Economic Growth ◽  
Central Bank ◽  
Interest Rates ◽  
Labour Markets ◽  
Content Type ◽  
Commercial Lenders ◽  
The Government ◽  
Roll Out ◽  
Growth Forecasts

Significance The RBA has cut its growth forecasts amid rising job losses, weakening demand and increasing signs that the latest COVID-19 lockdowns will continue to slow the economy until the pace of the vaccine roll-out programme can be increased. Impacts Although the RBA is independent, the government will hope it keeps rates low ahead of the elections due next year. Commercial lenders could raise interest rates independently of the RBA if inflation remains high. Wage pressures will re-emerge as labour markets tighten but may be mitigated by the extent of underemployment. Economic growth will be uneven across the country in coming months as pandemic-related restrictions vary by location.

scholarly journals Government Expenditure and Economic Growth Nexus: Evidence from Nigeria

2016 ◽  
Vol 5 (4) ◽  
pp. 56
Author(s):  
Oyediran, Leye Sherifdeen ◽  
Sanni, Ibrahim ◽  
Adedoyin, Lukman ◽  
Oyewole Olabode Michael
Keyword(s):  
Economic Growth ◽  
Capital Expenditure ◽  
Government Expenditure ◽  
Least Square ◽  
National Bureau ◽  
Fiscal Discipline ◽  
Secondary Sources ◽  
Economic Development And Growth ◽  
The Government ◽  
The Impact

The need to better the lots of citizens through government expenditure has raised questions on the impact of government expenditure on the economic development and growth of nations. It is against this background that this paper examined the antecedent effect of government spending on the Nigerian economic growth. The general objective of the study is to ascertain the relationship between government expenditure and economic growth in Nigeria; specifically, the study examined: (i) the significance influence of government capital expenditure on economic growth in Nigeria and (ii) the significance influence of government recurrent expenditure on economic growth in Nigeria. The study employed ordinary least square (OLS) multiple regression analysis in estimating the specified model, with the Gross Domestic Product (GDP) as the dependent variable, while Capital Expenditure (CAPEXP) and Recurrent Expenditure (REXP) are the independent variables. Data between 1980 – 2013 were collected from secondary sources through the National Bureau of Statistics (NBS) and Central Bank of Nigeria (CBN). Results showed that in Nigeria, there exist a significant relationship between the government expenditure and economic growth. The study therefore recommends instilling fiscal discipline in government expenditures, and putting in place structural mechanisms to act as surveillance on capital spending so as to boost the nation’s human and social capital.

Institution building and institutional voids

2016 ◽  
Vol 11 (1) ◽  
pp. 18-41 ◽  
Author(s):  
Sheila M. Puffer ◽  
Daniel J McCarthy ◽  
Alfred M Jaeger
Keyword(s):  
Economic Growth ◽  
Institutional Theory ◽  
Market Economy ◽  
Emerging Economies ◽  
Emerging Market ◽  
Institution Building ◽  
Institutional Voids ◽  
Formal Institutions ◽  
Content Type ◽  
Bric Countries

Purpose – The purpose of this paper is to present a comparative analysis of institutions and institutional voids in Russia, Brazil, and Poland over the decades of the 1980s through to 2015. The paper asserts that Russia and Brazil could learn much from Poland regarding formal institution building and formal institutional voids that cause problems like corruption and limit economic growth. Design/methodology/approach – A comparative case study approach is utilized to assess the relative success of the three emerging market countries in transitioning to a market economy, viewed through the lens of institutional theory. Findings – Poland’s experience in building successful formal institutions and mitigating major institutional voids can be instructive for Russia and Brazil which have shown far less success, and correspondingly less sustained economic growth. Research limitations/implications – This paper demonstrates the value of applying institutional theory to analyze the progress of emerging economies in transitioning to a market economy. Practical implications – This country comparison can prove valuable to other emerging economies seeking a successful transition to a market economy. Social implications – Since institutions are the fabric of any society, the emphasis on institutions in this paper can have positive implications for society in emerging markets. Originality/value – This paper is an original comparison of two BRIC countries with a smaller emerging economy, utilizing institutional theory. Factors contributing to Poland’s success are compared to Russia and Brazil to assess how those countries might be positively informed by Poland’s experience in building and strengthening sustainable formal institutions as well as avoiding institutional voids and their associated problems.

scholarly journals PENGARUH BELANJA MODAL, BELANJA SOSIAL, DAN PERTUMBUHAN EKONOMI TERHADAP TINGKAT KEMISKINAN DI KOTA MANADO

2019 ◽  
Vol 19 (2) ◽  
Author(s):  
Agustien Sendouw ◽  
Vekie Adolf Rumate ◽  
Debby Ch. Rotinsulu
Keyword(s):  
Economic Growth ◽  
Capital Expenditure ◽  
Government Expenditure ◽  
City Government ◽  
Social Spending ◽  
Social Expenditure ◽  
Poverty Level ◽  
The Government ◽  
The City ◽  
Poverty Levels

PENGARUH BELANJA MODAL, BELANJA SOSIAL, DAN PERTUMBUHAN EKONOMI TERHADAP TINGKAT KEMISKINAN DI KOTA MANADO Agustien Sendouw, Vekie A.Rumate, Debby Ch. Rotinsulu Ekonomi Pembangunan – Fakultas Ekonomi dan BisnisUniversitas Sam ratulangi  ABSTRAKKemiskinan merupakan masalah klasik disetiap negara. Usaha pengentasan kemiskinan telah lama dilakukan oleh pemerintah. Variabel yang mempengaruhi tingkat kemiskinan antara lain adalah pengeluaran pemerintah dan pertumbuhan ekonomi. Pengeluaran pemerintah Kota Manado melalui pos belanja modal, belanja sosial, dan pertumbuhan ekonomi diharapkan juga memberi pengaruh terhadap tingkat kemiskinan. Penelitian ini bertujuan untuk mengetahui pengaruh belanja modal, belanjasosial, dan pertumbuhan ekonomi terhadap tingkat kemiskinan di Kota Manado secara parsial maupun secara bersama-sama. Metodeanalisis yang digunakan adalah analisis regresi berganda. Hasil penelitian menunjukan bahwa belanja modal memiliki pengaruh yang negative dan signifikan secara parsial terhadap tingkat kemiskinan sedangkan belanja social dan pertumbuhan ekonomi tidak memiliki pengaruh secara parsial terhadap tingkat kemiskinan di Kota Manado. Secara bersama-sama belanja modal, belanja sosial, dan pertumbuhan ekonomi  tidak  memiliki  pengaruh  terhadap  tingkat  kemiskinan di Kota Manado. Kata Kunci  :   Belanja Modal,  Belanja  Sosial,  Pertumbuhan  Ekonomi, Tingkat  Kemiskinan.  ABSTRACTPoverty is a classic problem in every country. Poverty eradication efforts have been carried out by the government. Variables that affect the level of poverty among other government are government expenditure and economic growth. Manado City Government expenditure through capital expenditure, social expenditure, and economic growth is expected to also make an impact on poverty levels. This research aimed to determine the effect of capital expenditure, social expenditure, and economic growth on poverty levels in Manado partially or jointly. The analytical method used is multiple regression analysis. The results showed that capital expenditure has a negative and significant effect partially to the poverty level while social spending and economic growth do not have a partial effect on poverty levels in the city of Manado. Taken all research variables found that capital expenditures, social expenditure, and economic growth have no effect on the level of poverty in the city of Manado. Key Words : Regional Expenditure, Social Expenditure, Economic Growth, Poverty Level.

Does transportation infrastructure impact economic growth in India?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sreenu Nenavath
Keyword(s):  
Economic Growth ◽  
Economic Development ◽  
Positive Impact ◽  
Transport Infrastructure ◽  
Causality Test ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
The Government ◽  
Determinants Of Economic Growth

Purpose This paper aims to show a long run and causal association between economic growth and transport infrastructure. Design/methodology/approach In this study, the authors use ARDL models through the period 1990 – 2020 to investigate the relationship between transport infrastructure and economic growth in India. Findings The infrastructure has a positive impact on economic growth in India for the long run. Moreover, Granger causality test demonstrates a unidirectional relationship between transport infrastructure to economic development. Stimulatingly, the paper highlights the effect of air infrastructure statistically insignificant on economic growth in the long and short-run period. Originality/value The original outcome from the study delivers an inclusive depiction of determinants of economic growth from transport infrastructure in India, and these findings will help the policymakers to frame policies to improve the transport infrastructure. Hence, it is proposed that the government of Indian should focus more to upsurge the transport infrastructure for higher economic development.

scholarly journals Economic growth effect of private capital inflows: a structural VAR approach for Nigeria

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Friday Osemenshan Anetor
Keyword(s):  
Economic Growth ◽  
Forecast Error ◽  
Research Result ◽  
Structural Var ◽  
Capital Inflows ◽  
Growth Effect ◽  
Private Capital ◽  
Portfolio Investment ◽  
Content Type ◽  
The Government

Purpose The purpose of this paper is to examine the effect of shocks in the various components of private capital inflows on economic growth in Nigeria using quarterly data in the period 1986Q1–2016Q4. Design/methodology/approach The study employs the impulse response function and the forecast error variance decomposition of the structural vector autoregression (SVAR) model. Findings The research result shows that shocks in foreign direct investment (FDI) inflows and portfolio investment inflows have a positive and significant impact on economic growth in Nigeria. In addition, FDIs accounted for significant variation in the growth of the Nigerian economy followed by portfolio investments, while personal remittances exerted the least variation in growth. Practical implications The government should promote a favorable macroeconomic environment for existing and potential foreign investors to ensure the continued inflows of FDI and portfolio investment. Originality/value The novelty of this study lies in disaggregating private capital inflows and analyzing the effect of the shock of each component on the growth of the Nigerian economy using SVAR.

The effectiveness of government expenditure on economic growth in Botswana

2019 ◽  
Vol 10 (3) ◽  
pp. 368-384 ◽  
Author(s):  
Kafayat Amusa ◽  
Mutiu Abimbola Oyinlola
Keyword(s):  
Economic Growth ◽  
Government Spending ◽  
Negative Impact ◽  
Positive Impact ◽  
Government Expenditure ◽  
Public Spending ◽  
Empirical Literature ◽  
Content Type ◽  
Long Run ◽  
Short Run

Purpose The purpose of this paper is to examine the relationship between government expenditure and economic growth in Botswana over the period 1985‒2016. The study employed the auto-regressive distributed lag (ARDL) bounds testing approach in investigating the nexus. The study makes the argument that the effectiveness of public spending should be assessed not only against the amount of the expenditure but also by the type of the expenditure. The empirical findings showed that aggregate expenditure has a negative short-run and positive long-run effect on economic growth. When expenditure is disaggregated, both forms of expenditures have a positive short-run effect on economic growth, whereas only a long-run positive impact of recurrent expenditure is observed. The study suggests the need to prioritize scarce resources in productive recurrent and development spending that enables increased productivity. Design/methodology/approach This study examined the effectiveness of government spending in Botswana, within an ARDL framework from 1985 to 2016. To achieve this, the analysis is carried out on both an aggregate and disaggregated level. Government spending is divided into recurrent and development expenditures. Findings This study examined the effectiveness of government spending in Botswana, within an ARDL framework from 1985 to 2016. To achieve this, the analysis hinged on both the aggregate and disaggregated levels. The results of the aggregate analysis suggest that total public expenditure has a negative impact on economic growth in the short run; however, its impact becomes positive over the long run. On disaggregating government spending, the results show that both recurrent and development expenditures have a significant positive short-run impact on growth; however, in the long run, the significant positive impact is only observed for recurrent expenditure. Practical implications The results provide evidence of the diverse effects of government expenditure in the country. In the period under investigation, 73 percent of total government expenditure in Botswana was recurrent in nature, whereas 23 percent was related to development. From the results, it can be observed that although the recurrent expenditure has contributed to increased growth and must be encouraged, it is also pertinent for the Botswana Government to endeavor to place more emphasis on productive development expenditure in order to enhance short- and long-term growth. Further, there is a need to strengthen the growth-enhancing structures and to prioritize the scarce economic resources toward productive spending and ensuring continued proper governance over such expenditures. Originality/value The study provides empirical evidence on the effectiveness of government spending in a small open, resource-reliant middle-income SSA economy and argues that the effectiveness of public spending must be assessed not only against the amount of the expenditure but also on the type or composition of the expenditure. The study contributes to the scant empirical literature on Botswana by employing the ARDL approach to cointegration technique in estimating the long- and short-run impact of government expenditure on economic growth between 1985 and 2016.

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