An Empirical Examination of the Relationship between Government Spending and Economic Growth in South Africa, from 1980 to 2011

Abstract

The paper empirically examines the relationship between government expenditure and economic growth in South Africa, for the period 1980 to 2011. Econometric techniques are applied to test the hypothesis that an increase in government expenditure has increased economic growth. The study examines the causal relationship that exists between government spending and economic growth in South Africa using OLS regression techniques. Secondary data obtained from the SARB is used for data analysis. The results confirm a long-run positive relationship which exists between the two variables under study, and further shows that gross capital formation granger causes economic growth. DOI: 10.5901/mjss.2013.v4n3p235