Impact of recurrent and non-recurrent government expenditure on Bosnia and Herzegovina’s economic growth: an empirical analysis (1996–2022)

Abstract

This study aims to investigate the differential impacts of recurrent and non-recurrent government expenditures on the gross domestic product (GDP) of Bosnia and Herzegovina from 1996 to 2022. Aggregating data from various government levels, it employs ordinary least squares (OLS) regression techniques to analyze the relationship between these types of expenditures and economic growth. The findings reveal a significant positive correlation between recurrent expenditure and GDP, indicating that spending on health, education, and security contributes to economic growth. Conversely, non-recurrent expenditure, encompassing capital and development investments, does not show a statistically significant impact on GDP in the short term. This suggests that while recurrent spending is crucial for immediate economic performance, non-recurrent investments require strategic planning and efficiency to realize their growth potential. The study underscores the importance of efficient expenditure allocation in transitioning economies like Bosnia and Herzegovina, highlighting the need for a balanced fiscal strategy that supports both immediate economic stability and long-term development.