Abstract
In this study, we examine the causal relationship between government expenditure and economic growth – using the recently developed ARDL-bounds testing approach. The causal relationship between government expenditure and economic growth has been a subject of extensive debate in recent years. Currently, there exist three views regarding the relationship between government expenditure and economic growth. The first view maintains that it is government expenditure that drives economic growth. The second view argues that it is economic growth that spurs government expenditure. The third view maintains that both government expenditure and economic growth promote one another. The results of our study show that there is a unidirectional causal flow from economic growth to government expenditure. This applies both in the short run and in the long run. The causal flow from government expenditure to economic growth, however, could only be detected in the short run.
Published Version
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