The Relationship Between Public Spending and National Income: Empirical Evidence from Brazil from 1997 to 2019

Abstract

This paper investigates the existence of a causal relationship between public spending and national income, based on empirical evidence from Brazil, between 1997 and 2019. For this purpose, data on GDP and federal public expenditures were used. Initially, the ADF, Ng Perron and Perrontests were applied to measure the occurrence of unit roots, in I(0), no unitary roots were found, being stationary series. The Causality Test of Granger was then carried out to examine the occurrence of a causal relationship between expenditure and GDP, establishing the temporal precedence between the variables. It was concluded that there is a causal relationship between federal public expenditures and GDP. Thus, depending on the meaning, positive or negative, of this causal link, the approaches that deal with the dynamics of public spending and its causal link with income can be proven by Wagner's Law, Keynesian hypotheses and non-Keynesian hypotheses.

Assessing Fiscal Sustainability in the Landscape of Economics Research

“…Finally, the third trend (Figure 7) includes demographic aspects for fiscal sustaina- Despite numerous studies examining this link across different countries, including Arestis et al (2021), Bazán et al (2022), Durevall and Henrekson (2011), Katrakilidis and Tsaliki (2009), Kirikkaleli and Ozbeser (2022), Kuckuck (2014), Loizides and Vamvoukas (2005), Tessmann et al (2022), Tri Wahyudi and Harjanto (2022, no definitive consensus has been reached on confirming either Wagner's law or the Keynesian view. For instance, findings from Kirikkaleli and Ozbeser (2022) show that economic growth drives government expenditures over the long term, while government expenditures only positively influence short-term economic growth, particularly during times of recession.…”