The Causal Link Between Government Expenditure And Economic Growth In Egypt Over The Period From 1952 To 2020.

Abstract

Several studies have examined the causal relationship between government expenditure and economic growth. These studies yielded mixed results. Therefore, this study seeks to know the direction and nature of the relationship between government expenditure and economic growth in Egypt during the period from 1952 to 2020. Advanced econometric models were used for this purpose. The ADF (Augmented-Dickey Fuller) and PP (Phillips and Perron) test were used to verify the stationarity of the time series of the variables under study. The Granger causality test was also relied on to determine the direction of the relationship between government expenditure and economic growth in Egypt, and the VAR model (Vector auto regression model) to find out the nature of the relationship between government expenditure and economic growth. The study found that government expenditure is the motive of economic growth in Egypt, and the relationship between them is positive, meaning that the relationship between them is in one direction and starts from government expenditure . This means that the second trend, led by Keynes, applies to the state of the Egyptian economy. It also expresses that the Egyptian economy is still dependent on the government to achieve economic growth and is governed by excessive governmental interventions, tight administrative policies and restrictions, a large and inefficient public sector and a low role for the private sector. In the future, the researcher hopes that other studies will seek to search for the direction and nature of the relationship between the components of government expenditure and economic growth in Egypt.