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Is Government Spending an Important Factor in Economic Growth? Nonlinear Cubic Quantile Nexus from Eastern Europe and Central Asia (EECA)

Author

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  • Ali Shaddady

    (Department of Finance, King Abdulaziz University, P.O. Box 80200, Jeddah 21589, Saudi Arabia)

Abstract

This study rigorously investigates the non-monotonic phenomenon of the government spending–growth nexus in the EECA. Using panel data from 19 countries over the period 1995–2019, a nonlinear quadratic estimator and cubic nonlinear estimator were applied to quantile regressions. The preliminary findings revealed a negative linear nexus of government spending and economic growth using a linear model, while the nonlinear models (i.e., quadratic and cubic nonlinear estimators) indicated evidence of nonlinearity in the nexus in the EECA over the study period. Furthermore, the study found strong evidence of the existence of an inverted “N-shaped” (nonlinear cubic) nexus between government spending and growth, which can be interpreted as the typical credit-driven boom-and-bust cycle in most EECA countries. Finally, in elucidating the nexus between government spending and economic growth, the study found that most macroeconomic and governance variables are relaxing in explaining GS.

Suggested Citation

  • Ali Shaddady, 2022. "Is Government Spending an Important Factor in Economic Growth? Nonlinear Cubic Quantile Nexus from Eastern Europe and Central Asia (EECA)," Economies, MDPI, vol. 10(11), pages 1-26, November.
    • Handle: RePEc:gam:jecomi:v:10:y:2022:i:11:p:286-:d:974494
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    2. Jangkung Handoyo Mulyo & Imade Yoga Prasada & Agus Dwi Nugroho, 2023. "Impact of political and security stability on food security in developing countries: Case of Africa, Asia, Latin America and the Caribbean," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 69(9), pages 375-384.
    3. Kestrim Avdimetaj & Muhamet Gervalla, 2025. "The Relation Between Government Expenditures and Economic Growth: An Empirical Analysis in European Developing Countries," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 2, pages 354-377, June.
    4. Olalekan Charles Okunlola & Imran Usman Sani & Olumide Abiodun Ayetigbo & Olajide O. Oyadeyi, 2024. "Effect of government expenditure on real economic growth in ECOWAS: assessing the moderating role of corruption and conflict," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.

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