Public Expenditure and Economic Growth Relationship in Developing Countries: The case of Bangladesh

Abstract

This analysis empirically focuses on how government expenditure affects economic growth in Bangladesh. The study uses time-series data from 1965 through 2016 from the World Development Indicators for independent variables capital formation, household consumption expenditure, and government final consumption expenditure. The Johansen co-integration test showed a long-run association among the variables. However, OLS results show that capital formation and household consumption expenditure positively and government consumption expenditure negatively affect the GDP of Bangladesh. A more productive investment by the government sector may reduce the negative impact of government expenditure on the GDP of Bangladesh.