Public Consumption and Income in the Long Run: A Panel Data Study for Central African Countries

Abstract

This article examines panel cointegration methods to study the long-run effect of public consumption on the real output of 10 Central African economies (ECCAS: CEMAC + 4) from 1990 to 2016. We integrate the investment in cointegration regression and take into account the transverse dependence in a panel data parameter. The results indicate on average that public consumption expenditure has a negative impact on long-term real GDP. Conversely, investment has a positive effect on income. Overall, the results show that a decrease in public consumption in the fiscal adjustment process has no effect on the growth of these economies.