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Causality between Public Expenditure and Economic Growth: The Turkish Case

  • Bağdigen, Muhlis
  • Çetintaş, Hakan

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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File URL: https://mpra.ub.uni-muenchen.de/8576/1/MPRA_paper_8576.pdf
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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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Web page: https://mpra.ub.uni-muenchen.de

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  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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, October.
  6. Hirotugu Akaike, 1987. "Factor analysis and AIC," Psychometrika, Springer, vol. 52(3), pages 317-332, September.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. Bird, Richard M, 1971. "Wagner's o Law' of Expanding State Activity," Public Finance = Finances publiques, , vol. 26(1), pages 1-26.
  12. Hirotugu Akaike, 1969. "Fitting autoregressive models for prediction," Annals of the Institute of Statistical Mathematics, Springer, vol. 21(1), pages 243-247, December.
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