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Government Expenditure and Economic Growth in South Africa: an Empirical Investigation

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Abstract

In this study, the dynamic causal relationship between government expenditure and economic growth is examined using data from South Africa, the most advanced economy in Africa. The study uses the recently developed auto-regressive distributed lag model (ARDL)-bounds testing approach to examine this linkage. In order to address the omission of variable bias, the study incorporates unemployment as an intermittent variable between economic growth and government spending, thereby creating a simple multivariate model. The empirical findings of this study show that, although both government expenditure and economic growth Granger-cause each other in the short run, in the long run, it is economic growth that Granger-causes government expenditure.

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Authors and Affiliations

  1. Department of Economics, University of South Africa (UNISA), PO Box 392, 0003, Pretoria, South Africa

    Nicholas M Odhiambo

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  1. Nicholas M Odhiambo
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Correspondence to Nicholas M Odhiambo.

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Odhiambo, N.M. Government Expenditure and Economic Growth in South Africa: an Empirical Investigation. Atl Econ J 43, 393–406 (2015). https://doi.org/10.1007/s11293-015-9466-2

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  • DOI: https://doi.org/10.1007/s11293-015-9466-2

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