The Nexus between Economic Growth and Public Spending in Eastern European Countries

Abstract

This study analyses the relationship between governmental expenditure and economic growth rate for 8 Eastern-European countries with data for 1995-2014 using the ARDL model. The main goal of the present study is to test the presence of a non-linear-Armey Curve type-relationship between the government size and economic growth and also to find an optimal level of public spending which maximizes economic growth. Our results reveal the occurrence of a significant cointegration of public spending and economic growth for all considered countries and show that the current share of public spending within the Gross Domestic Product (GDP) exceeds the optimal level calculated for the three countries for which the Armey-type phenomenon occurs. Also, the results suggest that the optimal percentage of governmental spending varies between 37 % and 41 % and the present level is higher than the optimal level for Bulgaria, Hungary and Romania. The outstripping of the optimal level may conclude to the idea that the weight of public sector should be slightly decreased in these countries since the public sector is not able to efficiently cope with its resources. Based on the study results, the weight of public expenditure should be reduced while the efficiency of public spending programs should be increased.

Governments spending and growth nexus with nonlinear adjustments: re-examining the Croatian and Slovenian case

“…Thabane and Lebina (2016) using the ARDL bounds testing procedure for the period 1980 to 2012 confirmed the presence of Wagner's Law in Lesotho. There are the varieties and still emerging linear model specifications applied to exemine the relationship between governments spending and economic growth over the globe (Akonji et al, 2013;Srinivasan, 2013;Maku, 2014;Rosoiu, 2015;Kalawole, 2016;Idenyi et al, 2016;Lupu and Asandului, 2017).…”

Testing Wagner's Law and Keynesian Hypothesis in Selected Post-Soviet Countries

“…For the case of Nigeria, Ighodaro and Okiakhi (2010) reveals negative association while Igve et al (2015) conclude with positive relationship between the variables of interest. The issue is still remains its attractiveness in latest empirical literature (see Quy, 2017;Pascual Sáez et al, 2017;Chan et al, 2017;Lupu and Asandului, 2017;Dehning et al, 2016;Kargi, 2016;Aliyev and Mikayilov, 2016;Atasoy and Gur, 2016;Merza and Alhasan, 2016;Magazzino et al, 2015;Afonso and Jalles, 2014;Alshahrani and Alsadiq, 2014;Dogo et al, 2013;Bashirli and Sabiroglu, 2013, among others).…”

Análise entre os gastos do governo local e o crescimento econômico das cidades portuárias

“…Os componentes dos gastos públicos e suas relações com o crescimento econômico vêm sendo discutidos na literatura, especificamente na esfera da economia pública (Landau, 1983;Hsieh & Lai, 1994;Sinha, 1998;Al-Faris, 2002;Kolluri, Panik, & Wahab, 2000;Oliveira, 2004;Chen, 2006;Irmen & Kuehnel, 2009;Samudram, Nair, & Vaithilingam, 2009;Merza & Alhasan, 2016;Morozumi & Veiga, 2016;Ashwani & Sheera, 2017;Lupu & Asandului, 2017).…”

“…A maioria dos estudos elencados constatou que o impacto dos gastos públicos no crescimento econômico trouxe resultados positivos e negativos, ou seja, foram inconclusivos (Samudram et al, 2009;Chan et al, 2017;Lupu & Asandului, 2017). Esses gastos, enquanto forma de intervenção do governo, podem ser catalisadores econômicos se o Estado acrescer fundos para os gastos públicos de modo sistemático e não distorcido, a fim de retificar o mercado e, enfim, alavancar o crescimento econômico de longo prazo (Chan et al, 2017).…”

“…O investimento público para a formação de capital detém a capacidade de alterar o crescimento por meio de acréscimo da produção, redução de custo de transporte, tributação e investimento privado; à medida que os gastos de educação e saúde impulsionam a melhora da produtividade marginal do capital humano (Samudram et al, 2009;Morozumi & Veiga, 2016;Ashwani & Sheera, 2017;Lupu & Asandului, 2017), ressalta-se que essa relação entre os gastos públicos e o crescimento econômico pode não derivar de condições econômicas favoráveis (Chan et al, 2017).…”