Abstract
Government expenditure is one of the key elements of aggregate demand and has a significant impact on economic growth, especially in developing countries. The purpose of this study is to examine the impacts of government expenditure on economic growth of Afghanistan. The secondary time series data for the years (2001 to 2020) has been obtained from World Bank, Trade Map, Trading Economics, and NSIA. To study the empirical relationship between government expenditure and economic growth, the ARDL model has been applied. The results show that in the long-run the Government Expenditure (GGE) and Official Development Assistance per capita (ODAPC) have positive and significant impact on economic growth, while Foreign Direct Investment (FDI) and Trade Deficit (TRDDEFICIT) have negative and significant impact on economic growth. The results of short-run ECM indicates that the Government Expenditure (GGE) has a positive and significant impact on economic growth, while the other controlling variables like FDI and TRDDEFICIT have negative impacts, but the TRDDEFICIT coefficient is insignificant. The results of Pairwise Granger causality tests indicate that Government Expenditure does not cause the economic growth, and vice versa. The results of diagnostic tests show that there is no serial correlation among error terms and the model is stable. Key Words: Economic Growth, Government Expenditure, Revenue, Tax, FDI, Trade Deficit
Published Version
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