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Causality between Public Expenditure and Economic Growth: The Turkish Case

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  • Bağdigen, Muhlis
  • Çetintaş, Hakan

Abstract

This paper takes into account recent advances in econometric techniques and examines Wagner’s Law of long-run relationship between public expenditure and GDP for the Turkish case over the period of 1965-2000. The relationship is supposed public expenditure to be an outcome, not cause, of growth in GDP. Causality must run from GDP to public expenditure, not other ways around. Using the co-integration test and the Granger Causality test, we empirically find no causality in both directions; neither Wagner’s Law nor Keynes hypothesis is valid for the Turkish case.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8576.

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Date of creation: 21 Mar 2003
Date of revision: 07 Dec 2003
Publication status: Published in Journal of Economic and Social Research 6.1(2004): pp. 53-72
Handle: RePEc:pra:mprapa:8576

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Keywords: Public expenditure; economic growth;

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References

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  1. Anisul Islam, 2001. "Wagner's law revisited: cointegration and exogeneity tests for the USA," Applied Economics Letters, Taylor & Francis Journals, vol. 8(8), pages 509-515.
  2. Abizadeh, Sohrab & Yousefi, Mahmood, 1998. "An empirical analysis of South Korea's economic development and public expenditures growth," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 27(6), pages 687-700.
  3. Alan T. Peacock & Jack Wiseman, 1961. "The Growth of Public Expenditure in the United Kingdom," NBER Books, National Bureau of Economic Research, Inc, number peac61-1, octubre-d.
  4. John Thornton, 1999. "Cointegration, causality and Wagner's Law in 19th century Europe," Applied Economics Letters, Taylor & Francis Journals, vol. 6(7), pages 413-416.
  5. Hirotugu Akaike, 1987. "Factor analysis and AIC," Psychometrika, Springer, vol. 52(3), pages 317-332, September.
  6. Bird, Richard M, 1971. "Wagner's o Law' of Expanding State Activity," Public Finance = Finances publiques, , vol. 26(1), pages 1-26.
  7. Ganti, Subrahmanyam & Kolluri, Bharat R, 1979. "Wagner's Law of Public Expenditures: Some Efficient Results for the United States," Public Finance = Finances publiques, , vol. 34(2), pages 225-33.
  8. Hirotugu Akaike, 1969. "Fitting autoregressive models for prediction," Annals of the Institute of Statistical Mathematics, Springer, vol. 21(1), pages 243-247, December.
  9. Payne, James E & Ewing, Bradley T, 1996. "International Evidence on Wagner's Hypothesis: A Cointegration Analysis," Public Finance = Finances publiques, , vol. 51(2), pages 258-74.
  10. M. I. Ansari & D. V. Gordon & C. Akuamoah, 1997. "Keynes versus Wagner: public expenditure and national income for three African countries," Applied Economics, Taylor & Francis Journals, vol. 29(4), pages 543-550.
  11. Gandhi, Ved P, 1971. "Wagner's Law of Public Expenditure: Do Recent Cross-Section Studies Confirm it?," Public Finance = Finances publiques, , vol. 26(1), pages 44-56.
  12. A. F. Al-Faris, 2002. "Public expenditure and economic growth in the Gulf Cooperation Council countries," Applied Economics, Taylor & Francis Journals, vol. 34(9), pages 1187-1193.
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Cited by:
  1. Magazzino, Cosimo, 2012. "Wagner versus Keynes: Public spending and national income in Italy," Journal of Policy Modeling, Elsevier, vol. 34(6), pages 890-905.
  2. Magazzino, Cosimo, 2010. "Wagner's law and augmented Wagner's law in EU-27. A time-series analysis on stationarity, cointegration and causality," MPRA Paper 26668, University Library of Munich, Germany.
  3. Shanaka Herath, 2009. "The Size of the Government and Economic Growth: An Empirical Study of Sri Lanka," SRE-Disc sre-disc-2009_08, Institute for the Environment and Regional Development, Department of Socioeconomics, Vienna University of Economics and Business.
  4. Magazzino, Cosimo, 2010. "Wagner's law and Italian disaggregated public spending: some empirical evidences," MPRA Paper 26662, University Library of Munich, Germany.
  5. Alimi, R. Santos, 2014. "A Time Series and Panel Analysis of Government Spending and National Income," MPRA Paper 56994, University Library of Munich, Germany.
  6. Kumar, Saten, 2009. "Further Evidence on Public Spending and Economic Growth in East Asian Countries," MPRA Paper 19298, University Library of Munich, Germany.
  7. Cosimo Magazzino, 2012. "The Nexus between Disaggregated Public Spending and GDP in the Euro Area," Economics Bulletin, AccessEcon, vol. 32(3), pages 2560-2579.
  8. Shanaka Herath, 2012. "Size Of Government And Economic Growth: A Nonlinear Analysis," Economic Annals, Faculty of Economics, University of Belgrade, vol. 57(194), pages 7-30, July - Se.

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