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Government Expenditure and Economic Growth in South Africa: an Empirical Investigation

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  • Nicholas Odhiambo

Abstract

In this study, the dynamic causal relationship between government expenditure and economic growth is examined using data from South Africa, the most advanced economy in Africa. The study uses the recently developed auto-regressive distributed lag model (ARDL)-bounds testing approach to examine this linkage. In order to address the omission of variable bias, the study incorporates unemployment as an intermittent variable between economic growth and government spending, thereby creating a simple multivariate model. The empirical findings of this study show that, although both government expenditure and economic growth Granger-cause each other in the short run, in the long run, it is economic growth that Granger-causes government expenditure. Copyright International Atlantic Economic Society 2015

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  • Nicholas Odhiambo, 2015. "Government Expenditure and Economic Growth in South Africa: an Empirical Investigation," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(3), pages 393-406, September.
    • Handle: RePEc:kap:atlecj:v:43:y:2015:i:3:p:393-406
    DOI: 10.1007/s11293-015-9466-2
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    More about this item

    Keywords

    South Africa; Government expenditure; Economic growth; ARDL-bounds testing approach; C10; H50; O10;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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