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Threshold Cointegration, Asymmetric Causality and Wagner¡¯s Law: The African Experience Revisited

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  • Yaya Keho

Abstract

This study re-examines the Wagner's law of public expenditure for six sub-Saharan African countries while relaxing the assumption of a symmetric adjustment process underlying standard cointegration tests and error-correction models. The empirical methodology uses threshold cointegration tests to establish that there is a long-run relationship between government expenditure and per capita GDP for five countries, with income being positively related to public spending. Furthermore, the results of asymmetric Granger-causality tests provide support for Wagner¡¯s law in the long run for five countries (Cameroon, Cote d¡¯Ivoire, Ghana, Kenya, and Senegal), while the Keynesian view holds only in the short run for three countries (Benin, Cameroon, and Cote d¡¯Ivoire). The short run evidence for two countries (Kenya and Senegal) support both Wagner¡¯s law and Keynesian view.

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  • Yaya Keho, 2017. "Threshold Cointegration, Asymmetric Causality and Wagner¡¯s Law: The African Experience Revisited," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(5), pages 171-180, May.
    • Handle: RePEc:ibn:ijefaa:v:9:y:2017:i:5:p:171-180
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    More about this item

    Keywords

    Wagner¡¯s law; threshold cointegration; asymmetric error-correction model; causality;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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