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The Relationship between Government Spending and Economic Growth Revisited

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  • Wahyudi Wahyudi

    (Faculty of Economics and Business, Universitas Tanjungpura, Pontianak, Indonesia.)

Abstract

This study aims to analyze and verify the relationship between government spending and economic growth. This relationship has been a hot topic for debate among economists, with plenty of research done and being done upon it. This particular study uses panel data from 34 provinces in Indonesia during the 2014-2018 period. During this time, Indonesia s government allocated significant amount of its annual budget towards infrastructure. The estimated econometric test result using the Granger Causality Test did not find support for the effect of economic growth on government spending. Conversely, government spending has a significant effect on economic growth. This study provides support for Keynesian economic system, where government spending is used as a policy instrument to encourage economic growth in a nation.

Suggested Citation

  • Wahyudi Wahyudi, 2020. "The Relationship between Government Spending and Economic Growth Revisited," International Journal of Economics and Financial Issues, Econjournals, vol. 10(6), pages 84-88.
    • Handle: RePEc:eco:journ1:2020-06-11
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    References listed on IDEAS

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    More about this item

    Keywords

    Government Spending; Economic Growth; Keynes; Wagner;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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