“THE LONG RUN RELATIONSHIP BETWEEN GOVERNMENT EXPENDITURE AND ECONOMIC GROWTH IN INDIA”

Authors

  • MOHAMMED TAHIRU LAWAL,OFORI YAW OBED DANSO MIREKU JNR Graduate Student, Department of Studies in Economics and Cooperation, University of Mysore, Manasagangothri, Mysore 570006. Graduate Student, Department of Studies in Economics and Cooperation, University of Mysore, Manasagangothri, Mysore 570006. Graduate Student, Department of Studies in Economics and Cooperation, University of Mysore, Manasagangothri, Mysore 570006 Associate Professor, Department of Studies in Economics and Cooperation, University of Mysore, Manasagangothri, Mysore 570006

Keywords:

Co-integration, Causality, Equilibrium, Error correction, Long-run, Short-run, Wagner’s theory.

Abstract

This paper studies the long-run relationship between government expenditure and economic growth in the Indian economy using annual time series for the period 1975 to 2013. The study employed the Engle-Granger 2 stage approach to co-integration test and error correction technique as well as Granger causality test. We find empirical evidence of co-integration and that the deviation from long-run equilibrium is corrected by a high speed of adjustment per year. Our findings also show a unidirectional causality running from economic growth to government expenditure with no feedback effect. This is consistent with Wagner’s theory

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Published

2015-07-31

Issue

Vol. 4 No. 8 (2015): JULY 2015

Section

Articles

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