Causality between public expenditure and economic growth in the Kingdom of Bahrain

Abstract

Various studies generally found combined empirical evidence on the relationship between public expenditure and economic growth. In literature, two contrasting analysis of the relationship between public expenditure and economic growth has been established. The current research aims to test the Keynes view that public expenditure caused economic growth in the context of the Kingdom of Bahrain. The data for the variables used in the study was yearly time series data from 1981 to 2016 and applied stationary test, causality test and regression analysis to achieve the set objectives. The study results realised that there is a unidirectional causality between public expenditure and economic growth in the Kingdom of Bahrain. Moreover, the result supports the Keynesian view of public expenditure and economic growth in the Kingdom of Bahrain.