IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v46y2014i28p3523-3531.html
   My bibliography  Save this article

The government expenditure-economic growth relation in Japan: an analysis by using the ADL test for threshold cointegration

Author

Listed:
  • Hiroshi Ono

Abstract

Based on annual data from Japan for the period 1960 to 2010, we investigate the government expenditure-economic growth relation in Japan by using the autoregressive distributed lag test for threshold cointegration developed by Li and Lee (2010). In particular, we evaluate the validity of Wagner's view and the Keynesian view in the case of Japan. The empirical results presented herein indicate that of these two classical economics perspectives, only Wagner's view holds for Japan. The findings also demonstrate that the adjustment process towards its long-run equilibrium is asymmetric.

Suggested Citation

  • Hiroshi Ono, 2014. "The government expenditure-economic growth relation in Japan: an analysis by using the ADL test for threshold cointegration," Applied Economics, Taylor & Francis Journals, vol. 46(28), pages 3523-3531, October.
    • Handle: RePEc:taf:applec:v:46:y:2014:i:28:p:3523-3531
    DOI: 10.1080/00036846.2014.932046
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00036846.2014.932046
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036846.2014.932046?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Durevall, Dick & Henrekson, Magnus, 2011. "The futile quest for a grand explanation of long-run government expenditure," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 708-722, August.
    2. Hansen, Bruce E. & Seo, Byeongseon, 2002. "Testing for two-regime threshold cointegration in vector error-correction models," Journal of Econometrics, Elsevier, vol. 110(2), pages 293-318, October.
    3. Tsangyao Chang, 2012. "Nonlinear adjustment to purchasing power parity in China," Applied Economics Letters, Taylor & Francis Journals, vol. 19(9), pages 843-848, June.
    4. Tsangyao Chang & WenRong Liu & Steven Caudill, 2004. "A re-examination of Wagner's law for ten countries based on cointegration and error-correction modelling techniques," Applied Financial Economics, Taylor & Francis Journals, vol. 14(8), pages 577-589.
    5. Antoniou Antonis & Katrakilidis Constantinos & Tsaliki Persefoni, 2013. "Wagner’s Law versus Keynesian Hypothesis: Evidence from pre-WWII Greece," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(4), pages 457-472, June.
    6. Chang, Tsangyao & Lee, Chia-Hao & Liu, Wen-Chi, 2012. "Nonlinear adjustment to purchasing power parity for ASEAN countries," Japan and the World Economy, Elsevier, vol. 24(4), pages 325-331.
    7. Zvi Hercowitz & Michel Strawczynski, 2004. "Cyclical Ratcheting in Government Spending: Evidence from the OECD," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 353-361, February.
    8. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    9. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    10. Tsangyao Chang & Chi-Wei Su & Chia-Hao Lee, 2012. "Nonlinear adjustment to purchasing power parity with flexible Fourier function in G-7 countries," Applied Economics Letters, Taylor & Francis Journals, vol. 19(12), pages 1111-1116, August.
    11. Philip Grossman, 1988. "Government and economic growth: A non-linear relationship," Public Choice, Springer, vol. 56(2), pages 193-200, February.
    12. M. Adetunji Babatunde, 2011. "A bound testing analysis of Wagner's law in Nigeria: 1970-2006," Applied Economics, Taylor & Francis Journals, vol. 43(21), pages 2843-2850.
    13. Sunday Osaretin Iyare & Troy Lorde, 2004. "Co-integration, causality and Wagner's law: tests for selected Caribbean countries," Applied Economics Letters, Taylor & Francis Journals, vol. 11(13), pages 815-825.
    14. Saten Kumar & Don J. Webber & Scott Fargher, 2012. "Wagner's Law revisited: cointegration and causality tests for New Zealand," Applied Economics, Taylor & Francis Journals, vol. 44(5), pages 607-616, February.
    15. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    16. Shahbaz, Muhammad & Leitão, Nuno Carlos & Uddin, Gazi Salah & Arouri, Mohamed & Teulon, Frédéric, 2013. "Should Portuguese economy invest in defense spending? A revisit," Economic Modelling, Elsevier, vol. 35(C), pages 805-815.
    17. Peter Boswijk, H., 1994. "Testing for an unstable root in conditional and structural error correction models," Journal of Econometrics, Elsevier, vol. 63(1), pages 37-60, July.
    18. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    19. Yang-Cheng Ralph Lu & Tsangyao Chang & Chia-Hao Lee, 2012. "Nonlinear adjustment to purchasing power parity in transition countries: the ADL test for threshold cointegration," Applied Economics Letters, Taylor & Francis Journals, vol. 19(7), pages 629-633, May.
    20. Enders, Walter & Siklos, Pierre L, 2001. "Cointegration and Threshold Adjustment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(2), pages 166-176, April.
    21. MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 563-577, Sept.-Oct.
    22. Bharat Kolluri & Michael Panik & Mahmoud Wahab, 2000. "Government expenditure and economic growth: evidence from G7 countries," Applied Economics, Taylor & Francis Journals, vol. 32(8), pages 1059-1068.
    23. Yau, Hwey-Yun & Nieh, Chien-Chung, 2009. "Testing for cointegration with threshold effect between stock prices and exchange rates in Japan and Taiwan," Japan and the World Economy, Elsevier, vol. 21(3), pages 292-300, August.
    24. Chen, Sheng-Tung & Lee, Chien-Chiang, 2005. "Government size and economic growth in Taiwan: A threshold regression approach," Journal of Policy Modeling, Elsevier, vol. 27(9), pages 1051-1066, December.
    25. Mahmoud Wahab, 2004. "Economic growth and government expenditure: evidence from a new test specification," Applied Economics, Taylor & Francis Journals, vol. 36(19), pages 2125-2135.
    26. Tsangyao Chang, 2002. "An econometric test of Wagner's law for six countries based on cointegration and error-correction modelling techniques," Applied Economics, Taylor & Francis Journals, vol. 34(9), pages 1157-1169.
    27. Guochen Pan & Tsangyao Chang & D.P. Tang & Chia-Hao Lee, 2012. "Nonlinear adjustment to purchasing power parity in Latin American countries: the ADL test for threshold cointegration," Applied Economics Letters, Taylor & Francis Journals, vol. 19(9), pages 857-862, June.
    28. Ulrich K. M¸ller & Graham Elliott, 2003. "Tests for Unit Roots and the Initial Condition," Econometrica, Econometric Society, vol. 71(4), pages 1269-1286, July.
    29. Siyue Liu & Tsangyao Chang & Chia-Hao Lee & Pei-I Chou, 2012. "Nonlinear adjustment to purchasing power parity: the ADL test for threshold cointegration," Applied Economics Letters, Taylor & Francis Journals, vol. 19(6), pages 569-573, April.
    30. Magazzino, Cosimo, 2012. "Wagner versus Keynes: Public spending and national income in Italy," Journal of Policy Modeling, Elsevier, vol. 34(6), pages 890-905.
    31. Tsangyao Chang & Chia-Hao Lee & Pei-I Chou, 2012. "Nonlinear adjustment to purchasing power parity in G-7 countries," Applied Economics Letters, Taylor & Francis Journals, vol. 19(2), pages 123-128, February.
    32. Bharat Kolluri & Mahmoud Wahab, 2007. "Asymmetries in the conditional relation of government expenditure and economic growth," Applied Economics, Taylor & Francis Journals, vol. 39(18), pages 2303-2322.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ahmad, Ahmad Hassan & Aworinde, Olalekan Bashir, 2016. "The role of structural breaks, nonlinearity and asymmetric adjustments in African bilateral real exchange rates," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 144-159.
    2. Ayad Hicham, 2020. "Government Expenditure and Economic Growth Nexus in Mena Countries: Frequency Domain Spectral Causality Analysis," Economics and Business, Sciendo, vol. 34(1), pages 60-77, January.
    3. Selçuk Çağrı ESENER & Evren İPEK, 2018. "The Impacts of Public Expenditure, Government Stability and Corruption on Per Capita Growth: An Empirical Investigation on Developing Countries," Sosyoekonomi Journal, Sosyoekonomi Society, issue 26(36).
    4. Rashmi Rastogi & Sangeeta Chakravarty & Basanta K. Pradhan, 2019. "GWagner’s Law for Low Income States in India," IEG Working Papers 383, Institute of Economic Growth.
    5. Hassan Mohammadi & Rati Ram, 2015. "Economic Development and Government Spending: An Exploration of Wagner’s Hypothesis during Fifty Years of Growth in East Asia," Economies, MDPI, vol. 3(4), pages 1-11, October.
    6. Jong Chan Lee & Yi Joong Won & Sang Young Jei, 2019. "Study of the Relationship between Government Expenditures and Economic Growth for China and Korea," Sustainability, MDPI, vol. 11(22), pages 1-11, November.
    7. Juhyun Oh, 2023. "The Effects of Local Government Expenditures on Carbon Dioxide Emissions: Evidence from Republic of Korea," Sustainability, MDPI, vol. 15(20), pages 1-15, October.
    8. Irandoust, Manuchehr, 2019. "Wagner on government spending and national income: A new look at an old relationship," Journal of Policy Modeling, Elsevier, vol. 41(4), pages 636-646.
    9. Ali, Wajid & Munir, Kashif, 2016. "Testing Wagner versus Keynesian Hypothesis for Pakistan: The Role of Aggregate and Disaggregate Expenditure," MPRA Paper 74570, University Library of Munich, Germany.
    10. Ciro Bazán & Víctor Josué Álvarez-Quiroz & Yennyfer Morales Olivares, 2022. "Wagner’s Law vs. Keynesian Hypothesis: Dynamic Impacts," Sustainability, MDPI, vol. 14(16), pages 1-25, August.
    11. Selvanathan, Eliyathamby A. & Selvanathan, Saroja & Jayasinghe, Maneka Savithri, 2021. "Revisiting Wagner’s and Keynesian’s propositions and the relationship between sectoral government expenditure and economic growth," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 355-370.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Philip Arestis & Hüseyin Şen & Ayşe Kaya, 2021. "On the linkage between government expenditure and output: empirics of the Keynesian view versus Wagner’s law," Economic Change and Restructuring, Springer, vol. 54(2), pages 265-303, May.
    2. Omoshoro-Jones, Oyeyinka Sunday, 2016. "A Cointegration and Causality Test on Government Expenditure –Economic Growth Nexus: Empirical Evidence from a South African Province," MPRA Paper 102085, University Library of Munich, Germany, revised 17 Oct 2017.
    3. 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.
    4. Dimitrios Paparas & Christian Richter & Ioannis Kostakis, 2019. "The validity of Wagner’s Law in the United Kingdom during the Last Two Centuries," International Economics and Economic Policy, Springer, vol. 16(2), pages 269-291, April.
    5. Hüseyin Şen & Ayşe Kaya & Savaş Kaptan & Metehan Cömert, 2019. "Interest rates, inflation, and exchange rates in fragile EMEs: A fresh look at the long-run interrelationships," Working Papers halshs-02095652, HAL.
    6. Irandoust, Manuchehr, 2019. "Wagner on government spending and national income: A new look at an old relationship," Journal of Policy Modeling, Elsevier, vol. 41(4), pages 636-646.
    7. Burak Güriş & Yaşar Yaşgül, 2015. "Does the Fisher hypothesis hold for the G7 countries? Evidence from ADL threshold cointegration test," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(6), pages 2549-2557, November.
    8. Aziza Syzdykova, 2018. "The Relationship between the Oil Price Shocks and the Stock Markets: The Example of Commonwealth of Independent States Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 8(6), pages 161-166.
    9. Ali, Wajid & Munir, Kashif, 2016. "Testing Wagner versus Keynesian Hypothesis for Pakistan: The Role of Aggregate and Disaggregate Expenditure," MPRA Paper 74570, University Library of Munich, Germany.
    10. Ebaid Ali & Bahari Zakaria, 2019. "The Nexus between Government Expenditure and Economic Growth: Evidence of the Wagner’s Law in Kuwait," Review of Middle East Economics and Finance, De Gruyter, vol. 15(1), pages 1-9, April.
    11. V. Chandran Govindaraju & Ramesh Rao & Sajid Anwar, 2011. "Economic growth and government spending in Malaysia: a re-examination of Wagner and Keynesian views," Economic Change and Restructuring, Springer, vol. 44(3), pages 203-219, August.
    12. Andrew Phiri, 2020. "Structural changes in exchange rate-stock returns dynamics in South Africa: examining the role of crisis and new trading platform," Economic Change and Restructuring, Springer, vol. 53(1), pages 171-193, February.
    13. Andrew Phiri, 2017. "Nonlinear adjustment effects in the purchasing power parity," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 60(2), pages 14-38.
    14. Dimitrios Sideris, 2007. "Wagner's Law in 19th Century Greece: A Cointegration and Causality Analysis," Working Papers 64, Bank of Greece.
    15. Facchini, François & Melki, Mickaël, 2013. "Efficient government size: France in the 20th century," European Journal of Political Economy, Elsevier, vol. 31(C), pages 1-14.
    16. Narayan, Paresh Kumar & Nielsen, Ingrid & Smyth, Russell, 2008. "Panel data, cointegration, causality and Wagner's law: Empirical evidence from Chinese provinces," China Economic Review, Elsevier, vol. 19(2), pages 297-307, June.
    17. Bekő Jani & Boršič Darja, 2018. "Testing the Purchasing Power Parity Hypothesis: Case of ASEAN Economies," Naše gospodarstvo/Our economy, Sciendo, vol. 64(4), pages 74-85, December.
    18. Christian Pierdzioch & Renatas Kizys, 2013. "On the Linkages of the Stock Markets of the NAFTA Countries: Fundamentals or Speculative Bubbles?," International Economic Journal, Taylor & Francis Journals, vol. 27(3), pages 415-440, September.
    19. Stephen Moore, 2016. "Wagner in Ireland: An Econometric Analysis," The Economic and Social Review, Economic and Social Studies, vol. 47(1), pages 69-103.
    20. E. N. Gyamfi & E. F. Appiah, 2019. "Further evidence on the validity of purchasing power parity in selected African countries," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(2), pages 330-343, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:46:y:2014:i:28:p:3523-3531. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.