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The validity of Wagner’s Law in Romania during 1995-2015

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  • Paparas, Dimitrios
  • Stoian, Andreea

Abstract

The aim of this paper is to investigate the relationship between government expenditure and economic growth commonly known as Wagner’s law for one single Central and Eastern European country namely Romania. Using a dataset ranging from 1995 to 2015, we apply latest econometric time series techniques such as unit root test, Johansen cointegration and Granger causality test. The cointegration tests indicate support for Wagner’s hypothesis in all of its five versions, thus suggesting the existence of long-run relationship between government spending and national outcome. The causality tests show the absence of any short-run relationship from economic outcome to government expenditure in three out of five versions. However, taking into consideration that in its original formulation Wagner’s law explored the secular correlation between output and government commitments, we can state that the long run cointegration is more consistent with Adolph Wagner’s perspective.

Suggested Citation

  • Paparas, Dimitrios & Stoian, Andreea, 2016. "The validity of Wagner’s Law in Romania during 1995-2015," MPRA Paper 74378, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:74378
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    References listed on IDEAS

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    Cited by:

    1. Selim Demez, 2021. "Validity of Wagner’s Law in EU Member Transition Economies: Panel Causality Analysis," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 8(2), pages 199-210, July.
    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. Pula Leke & Elshani Alban, 2018. "The Relationship Between Public Expenditure and Economic Growth in Kosovo: Findings from a Johansen Co-Integrated Test and a Granger Causality Test," Ekonomika (Economics), Sciendo, vol. 97(1), pages 47-62, January.

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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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