Public Expenditure and Economic Growth: Evidence from the Developing Countries

2020 ◽  
Vol 9 (3) ◽  
pp. 228-236
Author(s):  
Deepti Ahuja ◽  
Deepak Pandit
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Public Expenditure ◽  
Trade Openness ◽  
Government Expenditure ◽  
Public Spending ◽  
Set Covering ◽  
Control Variables ◽  
Data Set ◽  
The Relationship

Regardless of theoretical grounds that presumed a positive relationship between government spending and economic growth, the extant research on this nexus is inclusive. This article re-examines the relationship between public expenditure and economic growth using more copious panel data set covering 59 countries in 1990–2019. Our empirical results confirm the unidirectional causality between economic growth and government expenditure where the causation runs between public spending and GDP growth. The results at large support the Keynesian framework that asserts the importance of government expenditure in stimulating economic growth. Further, the analysis reveals that after considering all the control variables such as trade accessibility, investment and inflation public spending positively affects economic growth. With regards to control variables, it was found that investment has a significant and positive bearing on economic growth. Evidence from the regression estimates further displays that trade openness encourages evolution in developing countries. However, population growth and unemployment have a detrimental effect on economic growth.

scholarly journals Nexus between Public Expenditure and Economic Growth in Nepal

2017 ◽  
Vol 40 (1-4) ◽  
pp. 28-43
Author(s):  
R. K. Shah ◽  
Tara Prasad Bhusal
Keyword(s):  
Economic Growth ◽  
Public Expenditure ◽  
Correction Term ◽  
Government Expenditure ◽  
Data Set ◽  
The Public ◽  
Real Gdp ◽  
Long Run ◽  
Bound Test ◽  
The Relationship

The article attempts to identify the relationship between public expenditure and economic growth in Nepal. Public expenditure is a fundamental element for the economic growth. On employing, ARDL bound test on data set for the period of 1975-2016, it is found that there in a long-run relationship between the public expenditure and economic growth. The bound test and error correction term clearly specify that there exists a long run relationship between government expenditure and economic growth in Nepalese economy. From the empirical study, it is found that government expenditure has significant influence on real GDP, which is proxy for economic growth. The study confirms the Keynesian theory of making government expenditure to boost economic growth of Nepal.

scholarly journals Inflation and Economic Growth: a Review of The International Literature

2017 ◽  
Vol 20 (3) ◽  
pp. 41-56 ◽  
Author(s):  
Foluso A. Akinsola ◽  
Nicholas M. Odhiambo
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Negative Relationship ◽  
Threshold Level ◽  
Data Set ◽  
Developed Economies ◽  
The Impact ◽  
The Relationship ◽  
Over Time ◽  
Country Specific

This paper surveys the existing literature on the relationship between inflation and economic growth in developed and developing countries, highlighting the theoretical and empirical indications. The study finds that the impact of inflation on economic growth varies from country to country and over time. The study also finds that the results from these studies depend on country‑specific characteristics, the data set used, and the methodology employed. On balance, the study finds overwhelming support in favour of a negative relationship between inflation and growth, especially in developed economies. However, there is still much controversy about the specific threshold level of inflation that is appropriate for growth. Most previous studies on this subject just assume a unidirectional causal relationsship between inflation and economic growth. To our knowledge, this may be the first review of its kind to survey, in detail, the existing research on the relationship between inflation and economic growth in developed and developing countries.

scholarly journals The Impact of Public Expenditure on Economic Growth: A Review of International Literature

2019 ◽  
Vol 19 (2) ◽  
pp. 81-101
Author(s):  
Sheilla Nyasha ◽  
Nicholas M. Odhiambo
Keyword(s):  
Economic Growth ◽  
Empirical Evidence ◽  
Government Spending ◽  
Public Expenditure ◽  
Negative Impact ◽  
Positive Impact ◽  
Government Expenditure ◽  
Empirical Literature ◽  
The Impact ◽  
The Relationship

Abstract Research background: Although a number of studies have been conducted on the relationship between public expenditure and economic growth, it is difficult to tell with certainty whether or not an increase in public expenditure is good for economic growth. This lack of consensus on the results of the previous empirical findings makes this study of paramount importance as we take stock of the available empirical evidence from the 1980s to date. Purpose: In this paper, theoretical and empirical literature on the relationship between government expenditure and economic growth has been reviewed in detail. Focus was placed on the review of literature that assessed the impact of government spending on economic growth. Research Methodology: This study grouped studies on the impact of public expenditure on economic growth based on their results. Three groups emerged – positive impact, negative impact and no impact. This was followed by a review of each relevant study and an evaluation of which outcome was more prevalent among the existing studies on the subject. Results: The literature reviewed has shown that the impact of government spending on economic growth is not clear cut. It varies from positive to negative; with some studies even finding no impact. Although the impact of government spending on economic growth was found to be inconclusive, the scale tilts towards a positive impact. Novelty: The study provides an insight into the relationship between public expenditure and economic growth based on a comprehensive review of previous empirical evidence across various countries since the 1980s.

scholarly journals A GROWTH MODEL FOR THE QUADRUPLE HELIX

2012 ◽  
Vol 13 (5) ◽  
pp. 849-865 ◽  
Author(s):  
Oscar Afonso ◽  
Sara Monteiro ◽  
Maria Thompson
Keyword(s):  
Economic Growth ◽  
Civil Society ◽  
Growth Model ◽  
Public Expenditure ◽  
Government Expenditure ◽  
Theoretical Framework ◽  
Quadruple Helix ◽  
The Relationship ◽  
Productive Public Expenditure ◽  
Productive Government Expenditure

We develop a R&D-based growth model with productive public expenditure in order to frame the Quadruple Helix (QH) innovation concept, based on four helices: Academia & Technological Infrastructures, Firms, Government and Civil Society. Our motivation stems from acknowledgment that the relationship between these four helices and their joint impact on growth is in need of a theoretical framework. We aim to emphasise the importance to economic growth of innovation systems structured on these four helices. The introduced model confirms theoretically the notion that increases in: (i) complementarities between distinct productive units, or (ii) in productive government expenditure, lead to higher growth.

scholarly journals Does Information and Communication Technologies Sustain Economic Growth? The Underdeveloped and Developing Countries Case

2010 ◽  
pp. 147-160
Author(s):  
Erkan Erdil ◽  
I. Hakan Yetkiner ◽  
Burcu Türkcan
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Information And Communication Technologies ◽  
Communication Technologies ◽  
Data Set ◽  
Long Run ◽  
Determining Factors ◽  
Information And Communication ◽  
The Impact ◽  
The Relationship

This chapter tests the impact of ICT on economic growth for underdeveloped and developing countries by using a panel dataset for the period of 1995-2006. The authors first develop the theory of the relationship between ICT and economic growth. They show that ICT-capital has a positive effect both on long-run and transitional income per capita, if it is considered as a factor of production. Next, the authors estimate a panel data set with 131 underdeveloped and developing countries under the assumption that ICT is one of the determining factors of economic growth. They find that ICT has positive and significant effect on economic growth even after the use of some control variables.

scholarly journals Relationship between Financial Development and Economic Growth: Empirical Evidence in Indonesia

2018 ◽  
Vol 10 (12) ◽  
pp. 37 ◽  
Author(s):  
Hafnida Hasan
Keyword(s):  
Economic Growth ◽  
Empirical Evidence ◽  
Granger Causality ◽  
Financial Development ◽  
Trade Openness ◽  
Government Expenditure ◽  
Long Run ◽  
Push Forward ◽  
Using Data ◽  
The Relationship

The aim of this paper to examine the relationship between financial development and economic growth in Indonesia by using data from 1986 until 2014. Johansen co-integration and Granger causality are utilized to analyze the data. The financial development is measured by the ratio of broad money and other control variables such as trade openness and government expenditure. The finding indicates that there is long run relationship between financial development and economic growth. Meanwhile, a unidirectional relationship had been found, it come from economic growth to financial development. Therefore, a policy to increase economic growth will push forward in proper to improve financial development in Indonesia.

Dynamics of Public Expenditure on Defense and Economic Growth Pattern in Developed and Developing Countries

2021 ◽  
pp. 669-681
Author(s):  
Madhabendra Sinha ◽  
Anjan Ray Chaudhury ◽  
Partha Pratim Sengupta
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Public Expenditure ◽  
Positive Impact ◽  
Public Spending ◽  
Developed Countries ◽  
Panel Var ◽  
Dynamic Relationship ◽  
Panel Data Regression ◽  
Using Data

Endogenous growth theories refer that public spending has a considerable bearing on economic growth. Rise in public spending retards rate of economic growth. As the economic structure across the developed and developing countries varies significantly, the effect of public spending on non-productive activities may differ across these countries. In this context, the authors develop a comparative study for looking at the dynamic relationship between public expenditure on defense activities and pattern of economic growth between developing and developed countries across the globe over the period 1960-2015. Using data from SIPRI and World Bank, the authors invoke the panel data regression with panel co-integration test followed by panel VAR. Findings indicate that developed countries have positive impact of defense spending on growth, and the relationship is bi-directional, whereas the impact is found to be negative in developing nations.

scholarly journals Workers’ Remittances and Economic Growth: Evidence From Bangladesh

2021 ◽  
Vol 12 (2) ◽  
pp. 233
Author(s):  
Tamanna Islam
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Granger Causality ◽  
Foreign Exchange ◽  
Causal Relation ◽  
Granger Causality Test ◽  
Causality Test ◽  
Data Set ◽  
Significant Function ◽  
The Relationship

Workers’ remittances are assuming a significant function as a wellspring of foreign exchange earnings for developing countries. As a result, these countries inflows are growing rapidly. This study inspects the relationship between worker’s remittances and economic growth of Bangladesh using the data set for the period 2007-2018. The results using the Granger-causality test show that the workers’ remittances and economic growth show a bi-directional causal relation. There is a bi-directional causal relation between capital and economic growth. The relationship is negative when the study considers number of workers growth and economic growth. The used growth model shows that economic growth of Bangladesh is remittances-dependent. Hence, it provides evidence to support those remittances is a regulating issue of economic growth of Bangladesh.

The relationship between international trade openness and economic growth in the developing economies

2015 ◽  
Vol 8 (2) ◽  
pp. 123-139 ◽  
Author(s):  
Muhammad Tahir ◽  
Toseef Azid
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Developing Economies ◽  
Labour Force ◽  
Trade Openness ◽  
Content Type ◽  
Long Run ◽  
Speed Up ◽  
Determinants Of Economic Growth ◽  
The Relationship

Purpose – This paper aims to establish a relationship between trade openness and economic growth in the context of the developing countries. This study has proposed a new measure of trade openness to the literature, as the available measures are flawed. Design/methodology/approach – Empirical analyses are carried out with the help of panel econometric techniques. Findings – The main finding of the paper is that the relationship between trade openness and economic growth is positive and statistically significant for developing countries. Besides trade openness, other determinants of economic growth such as investment and labour force are also significantly related with economic growth and carry expected coefficients. Further, it is found that frequent fluctuations in prices are detrimental to long-run economic growth. Practical implications – Therefore, the developing countries are suggested to speed up the process of trade liberalization and also pay favourable attention to other determinants of economic growth to achieve high economic growth. Originality/value – The authors have used a new measure of trade openness apart from the conventional trade volume measure of trade openness.

scholarly journals Effect of Public Spending on Economic Growth in Kenya

2019 ◽  
pp. 1-11
Author(s):  
Gideon Mukui ◽  
Japheth Awiti ◽  
Joseph Onjala
Keyword(s):  
Economic Growth ◽  
Time Series Data ◽  
Trade Openness ◽  
Government Expenditure ◽  
Public Spending ◽  
Series Data ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
Long Run ◽  
Positive Effect

This study aimed at examining the relationship between public spending and economic growth and how the composition of government expenditure affects economic growth in Kenya using time series data from 1980 to 2014. To achieve the objectives, modified Granger causality and Autoregressive Distributed Lag model (ARDL) were used. The results revealed both short term and long term causality from economic growth to government expenditure but only short run causality from government expenditure to economic growth. Based on the economic classification, the long run ARDL regression results showed development expenditure promotes economic growth while government purchases have no significant effect on GDP. Other control variables such as inflation and unemployment had negative effect on economic growth. In terms of functional classification, the regression results showed that expenditure on education and infrastructure are important drivers of economic growth. The positive effect of health expenditure was not significant.  Further, the regression results indicated that domestic savings and trade openness had significant positive effect on economic growth. Based on the empirical findings this study therefore recommends resources to be directed towards financing public infrastructure investment to improve economic performance. The study also recommends increasing resource allocation in the education sector to improve efficiency and support skills and human capital development that are important in promoting economic growth through increases in labor productivity. The study also recommends policymakers to enhance domestic resource mobilization and pursue favorable trade policies aimed at fostering robust economic growth.

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