Relationship between Public Expenditure and Economic Development in Sub- Saharan Africa Countries: The VECM

Abstract

This study examined the relationship between public expenditure and economic development in Sub-Saharan African nations using time series data from 1970 to 2021. The study employed the Vector Error Correction Model (VECM) and Granger Causality approaches, leveraging variables such as real GDP per capita and aggregate public expenditure. The short and long run outcomes show that government expenditure has a negative impact on economic development. In addition, the study's causality test reveals a bidirectional link between economic success and government spending. The call for a study pushes Tanzania's government to enhance its priorities while reinforcing programs such as cost-cutting and fiscal consolidation. It also underlines the need of government expenditure on development projects that are initiated and completed on time to minimize cost escalation