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Cointegration Analysis-Causality Testing and Wagner's Law The Case of Turkey, 1950-1990

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  • Safa Demirbas

Abstract

This paper investigates statistically the existence of a long-run relationship between public expenditure and GNP (Wagner’s Law) using data for Turkey over the period 1950-1990. Recent advances in time series analysis have permitted the investigation of the long-run relationship between public expenditure and GNP in terms of cointegration analysis. In the case of Wagner’s Law, evidence of cointegration is sufficient to establish a long-run relationship between public expenditure and income. However, to support Wagner’s Law would require unidirectional causality from income to public expenditure. Therefore cointegration should be seen as a necessary condition for Wagner’s Law, but not sufficient. Hence, conditional on cointegration results, it is necessary to look at the causality properties of the model(s). Using the Engle and Granger cointegration test, the Granger Causality test and Turkish time series aggregate data for the period 1950-1990, we find no empirical support for Wagner’s Law.

Suggested Citation

  • Safa Demirbas, 1999. "Cointegration Analysis-Causality Testing and Wagner's Law The Case of Turkey, 1950-1990," Discussion Papers in Economics 99/3, Division of Economics, School of Business, University of Leicester.
    • Handle: RePEc:lec:leecon:99/3
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    File URL: https://www.le.ac.uk/economics/research/RePEc/lec/leecon/econ99-3.pdf
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    Cited by:

    1. Isiaq O. Oseni & Ibrahim A. Adekunle, 2020. "Relevance of Wagner’s Hypothesis in Achieving Sustainable Development Agenda in Nigeria," Research Africa Network Working Papers 20/006, Research Africa Network (RAN).
    2. Ekong, Christopher N. & Onye, Kenneth U., 2016. "A Framework for Sustaining Rural Development Program: Evidence from Micro-Panel Data in Nigeria," MPRA Paper 88358, University Library of Munich, Germany.
    3. Sobhee, S. K. & Joysuree, V., 2004. "The Implications of Openness for WAGNER’S Law. An International Comparison of 20 Countries, 1971-2000," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 4(3).
    4. Henryk Gurgul & Łukasz Lach & Roland Mestel, 2012. "The relationship between budgetary expenditure and economic growth in Poland," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 20(1), pages 161-182, March.
    5. Magazzino, Cosimo, 2010. "Wagner's law and Italian disaggregated public spending: some empirical evidences," MPRA Paper 26662, University Library of Munich, Germany.
    6. Isiaq O. Oseni & Ibrahim A. Adekunle, 2020. "Relevance of Wagner’s Hypothesis in Achieving Sustainable Development Agenda in Nigeria," Working Papers of the African Governance and Development Institute. 20/006, African Governance and Development Institute..
    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. Masudul Hasan Adil & Aadil Ahmad Ganaie & B. Kamaiah, 2017. "Wagner’s Hypothesis: An Empirical Verification," IIM Kozhikode Society & Management Review, , vol. 6(1), pages 1-12, January.

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