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Causality between Government Consumption Expenditure and National Income: OECD Countries

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  • Ahsan, Syed M
  • Kwan, Andy C C
  • Sahni, Balbir S

Abstract

Unlike existing empirical studies confined to polar cases (either a single country or a cross-section of many) yielding inconsistent results, this investigation of an intermediate size sample of twenty-four OECD countries discerns causal relations between government consumption expenditure and national income. The Granger bivariate model is used to establish the pattern of causality and the results are interpreted in terms of the three subgroupings of countries with varying rates of public expenditure growth from 1953 to 1982. Bidirectional causality emerges as the dominant pattern, with nineteen out of twenty-four cases revealing strong evidence of causal links between the two variables.

Suggested Citation

  • Ahsan, Syed M & Kwan, Andy C C & Sahni, Balbir S, 1989. "Causality between Government Consumption Expenditure and National Income: OECD Countries," Public Finance = Finances publiques, , vol. 44(2), pages 204-224.
    • Handle: RePEc:pfi:pubfin:v:44:y:1989:i:2:p:204-24
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    Cited by:

    1. Arvin, Mak B. & Pradhan, Rudra P. & Nair, Mahendhiran S., 2021. "Are there links between institutional quality, government expenditure, tax revenue and economic growth? Evidence from low-income and lower middle-income countries," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 468-489.
    2. Liu, Shenglong & Hu, Angang, 2013. "Demographic change and economic growth: Theory and evidence from China," Economic Modelling, Elsevier, vol. 35(C), pages 71-77.
    3. Marie-Ange VEGANZONES-VAROUDAKIS, 2000. "Infrastructures, investissement et croissance : un bilan de dix années de recherches," Working Papers 200007, CERDI.
    4. Abu-Bader, Suleiman & Abu-Qarn, Aamer S., 2003. "Government expenditures, military spending and economic growth: causality evidence from Egypt, Israel, and Syria," Journal of Policy Modeling, Elsevier, vol. 25(6-7), pages 567-583, September.
    5. Baffes, John & Shah, Anwar, 1990. "Taxing choices in deficit reduction," Policy Research Working Paper Series 556, The World Bank.
    6. Muthi Samudram & Mahendhiran Nair & Santha Vaithilingam, 2009. "Keynes and Wagner on government expenditures and economic development: the case of a developing economy," Empirical Economics, Springer, vol. 36(3), pages 697-712, June.
    7. Mr. Qing Wang & Mr. Ugo Fasano-Filho, 2001. "Fiscal Expenditure Policy and Non-Oil Economic Growth: Evidence from GCC Countries," IMF Working Papers 2001/195, International Monetary Fund.
    8. repec:bgu:wpaper:163 is not listed on IDEAS
    9. Krishna Mazumdar, 2000. "Causal Flow between Human Well-being and per Capita Real Gross Domestic Product," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 50(3), pages 297-313, June.

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