Government expenditure and economic growth: a post-Keynesian analysis

Parui, Pintu

doi:10.1080/02692171.2020.1837744

Cited by 15 publications

(6 citation statements)

References 41 publications

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“…As it is evident from the Figure 6 and Figure 7, "Social Protection" spending accounts for about a third of all public spending in Kazakhstan and has been steadily growing over the last five years. A heavy cash-based social orientation of state budget expenditures may lead to a long-term structural reduction in aggregate demand (determining the upper limit of consumption of certain groups of the population), and at the same time, has a potential to suppress investment and productivity in industrial sectors of the economy (a decrease in capital-intensive and export-oriented industries) Parui (2020). As a consequence, such a pro-subsidy fiscal policy can lead to an increase in service-oriented sectors, reduction in the supply of goods, and an acceleration of money turnover, which entails an increase in pro-inflationary pressures in the medium term.…”

Section: Discussionmentioning

confidence: 99%

The Role of Fiscal Policy in The Inflation: VAR Analysis of Kazakhstan’s Economy, 2005-2020

Ybrayev¹

2021

Preprint

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The paper analyzes the patterns of dynamic effects of fiscal policy to domestic inflation in the context of a small open economy. Using 4-variable (government spending, fiscal deficit, money stock (M2), and domestic inflation rate) vector autoregression model estimated with quarterly data for Kazakhstan’s economy in the period of 2005Q1-2020Q1. We distinguish between government expenditure on consumption and investment. As a result, we find that a fiscal policy shock have certain positive effects on the inflation rate. In particular, social protection spending adds 1% to the inflation rate in the following four quarters, while the government capital purchases do not produce sizable effect on inflation dynamics even in the longer term horizons. Overall, for the fiscal policy to become inflation-neutral, we suggest several policy recommendations.

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Section: Discussionmentioning

confidence: 99%

The Role of Fiscal Policy in The Inflation: VAR Analysis of Kazakhstan’s Economy, 2005-2020

Ybrayev¹

2021

Preprint

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“…In particular, they tend to increase public spending on highly visible infrastructure to electorates, such as bridges and rural roads, to signal their competence (Rogoff, 1990;Veiga and Veiga, 2007;Lewis, 2018). Increasing government spending on economic affairs before elections helps to stimulate demand and boost economic growth, especially during periods of economic recessions (see, for example, Devarajan et al, 1996;Parui, 2021). Besides, short-term opportunistic effects can also be observed in the social sector, where incumbents increase spending on the welfare state to placate citizens, especially low-income voters (Schneider, 2010).…”

Section: Literature Review 21 Theory and Related Literaturementioning

confidence: 99%

The political budget cycles in emerging and developing countries

Nguyen

Tran

2023

JED

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PurposeThis paper examines the political budget cycles in emerging and developing countries using a sample of 91 countries from 1992 to 2019.Design/methodology/approachThis paper employs a pool Ordinary Least Squares (OLS) model with clustered standard errors at the country level. To address endogeneity issues, the authors also employ a two-step system generalized methods of moments model.FindingsThe authors find clear evidence of political budget cycles in emerging and developing countries. The authors consistently find that incumbents increase total government spending, particularly in economic affairs, public services and social welfare, in the year before an election and the election year. In contrast, they contract spending in the year after an election.Research limitations/implicationsPolicymakers should be aware of the political budget cycles during election years. Promoting control of corruption and democracy helps to alleviate the effects of the political budget cycles in emerging and developing countries.Originality/valueThe authors are among the first to explore the political budget cycles in emerging and developing countries by focusing on the total government spending and its main compositions, including expenditures on economic affairs, public services and social welfare. Besides, the authors also explore the conditioning effects of control of corruption, political ideology and democracy.

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“…According to the Keynesian theory of economic growth, government expenditure positively impacts economic growth (Parui 2021). Public expenditure spurs domestic consumption, exports, and employment through the multiplier effect, thus generating more national income.…”

Section: Public Expenditurementioning

confidence: 99%

Factors affecting economic growth: empirical evidence from developing countries

Zieba¹,

Dong²,

Mbugua³

2022

Preprint

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The question around factors affecting economic growth in developing nations is widely debated as it influences the policies to promote economic welfare. This paper, therefore, determines the factors influencing economic growth in developing countries. By estimating a fixed-effect model with a panel dataset for 62 developing countries from 2010 to 2018, the study found that government spending and natural resource rents have a favourable impact on per capita GDP growth. In contrast, rising labour force participation and inflation stifle economic growth in these countries.

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Government expenditure and economic growth: a post-Keynesian analysis

Cited by 15 publications

References 41 publications

The Role of Fiscal Policy in The Inflation: VAR Analysis of Kazakhstan’s Economy, 2005-2020

The Role of Fiscal Policy in The Inflation: VAR Analysis of Kazakhstan’s Economy, 2005-2020

The political budget cycles in emerging and developing countries

Factors affecting economic growth: empirical evidence from developing countries

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