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The effects of government expenditure on economic growth: the case of Malaysia

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  • Hasnul, Al Gifari

Abstract

The relationship between government expenditure and economic growth has been debated for decades and has not clearly stated yet. This paper gives a further evidence on the relationship between government expenditure and economic growth in the case of Malaysia. In this study, the government expenditure has been disaggregated in to the government operating and development expenditure. We also classified the government expenditure based on the sector of which it expensed. We used OLS technique to find the fixed effects of government expenditure on economic growth for the last 45 years. This investigation is made by using the time series data during the period 1970 – 2014. Our result indicates that there is a negative correlation between government expenditure and economic growth in Malaysia for the last 45 years. Moreover, the classification of government expenditure indicates that only housing sector expenditure and development expenditure significantly contribute to a lower economic growth. Education, defense, healthcare, and operating expenditure do not show significant any evidence of its impact on the economic growth. These finding may give some overview of policy implications to the Malaysia policymakers on optimizing the effects of government expenditure in economic growth.

Suggested Citation

  • Hasnul, Al Gifari, 2015. "The effects of government expenditure on economic growth: the case of Malaysia," MPRA Paper 71254, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:71254
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    References listed on IDEAS

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    Cited by:

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    3. Samuel Erasmus ALNAA & Juabin MATEY, 2024. "Assessing the Effects of Macroeconomic Variables on Economic Welfare in Ghana," Management and Economics Review, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 9(1), pages 138-157, February.
    4. Desislava Stoilova & Ivan Todorov, 2021. "Fiscal policy and economic growth: Evidence from Central and Eastern Europe," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 7(2), pages 146-159.
    5. Priya Ranjan & Prasant Kumar Panda, 2022. "Pattern of Development Spending and Its Impact on Human Development Index and Gross State Domestic Product in Low-income States in India," Journal of Development Policy and Practice, , vol. 7(1), pages 71-95, January.
    6. Atdhetar Gara & Vese Qehaja-Keka & Abdylmenaf Bexheti & Arber Hoti & Driton Qehaja, 2024. "Impact of Fiscal Policy on Economic Growth: Evidence from South East European Countries," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 65-77.
    7. Chai-Thing Tan & Azali Mohamed & Muzafar Shah Habibullah & Lee Chin, 2020. "The Impacts of Monetary and Fiscal Policies on Economic Growth in Malaysia, Singapore and Thailand," South Asian Journal of Macroeconomics and Public Finance, , vol. 9(1), pages 114-130, June.
    8. Nooreen Mujahid & Azeema Begam & Nargis, 2019. "SMEs Output and GDP Growth: A Dynamic Perspective," Journal of Asian Business Strategy, Asian Economic and Social Society, vol. 9(1), pages 53-65, June.

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    More about this item

    Keywords

    Government Expenditure; Economic Growth; OLS.;
    All these keywords.

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education

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