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Government Expenditure and Economic Growth in Euro Area Countries

Author

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  • Cenc Helena

    (University of Maribor, Faculty of Economics and Business, Razlagova ulica 14, 2000 Maribor, Slovenia)

Abstract

In this article, the author examines the impact of government expenditure on economic growth. A review of empirical studies shows that researchers have found a negative link between government spending and economic growth in most cases. This paper is based on yearly data between 1995 and 2020 in euro area countries, with the application of linear regression on panel data. The main purpose is to determine whether government spending affects economic growth and, if so, how. Based on the econometrics model applied, the author established that in panel data, government expenditure has a negative impact on economic growth, more precisely, if government spending as a share of GDP increases by 1%, economic growth decreases by 0.509%. In addition, there is a significant negative relationship between government expenditure and economic growth for each country as well as the entire panel.

Suggested Citation

  • Cenc Helena, 2022. "Government Expenditure and Economic Growth in Euro Area Countries," Naše gospodarstvo/Our economy, Sciendo, vol. 68(2), pages 19-27, June.
    • Handle: RePEc:vrs:ngooec:v:68:y:2022:i:2:p:19-27:n:4
    DOI: 10.2478/ngoe-2022-0008
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    References listed on IDEAS

    as
    1. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    2. C. Colombier, 2009. "Growth effects of fiscal policies: an application of robust modified M-estimator," Applied Economics, Taylor & Francis Journals, vol. 41(7), pages 899-912.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Government expenditure; Economic growth; Euro area; Panel data;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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