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Relationship between government expenditure and economic growth: evidence from Vanuatu

Chen, Hong and Singh, Baljeet and Aru, Wesley S. (2020) Relationship between government expenditure and economic growth: evidence from Vanuatu. Journal of the Asia Pacific Economy, NA . NA. ISSN 1354-7860

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Abstract

This study examines the impact of government expenditure on economic growth in Vanuatu for the period 1981 to 2016. We first examined the effects of government expenditure on economic growth when government expenditure is financed by tax revenues, non-tax revenues, and budget deficit/surplus. Secondly, we examined the effects of government expenditure compositions on economic growth. Thirdly, we tested for weak exogeneity of fiscal factors on investment. We observed that fiscal factors and investment have causal effects on economic growth in Vanuatu. More specifically, government expenditure negatively influences long-run economic growth when financed by tax revenues, but positively influences long-run economic growth when financed by other sources such as non-tax revenues and budget surplus/deficit. We further noted that amongst expenditure compositions, expenditure on education, health, wages & salaries, agriculture, and interest payments individually has larger effects on the long-run economic growth than the remaining expenditure composition as a whole.

Item Type: Journal Article
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HJ Public Finance
Divisions: School of Accounting, Finance and Economics (SAFE)
Depositing User: Ms Shalni Sanjana
Date Deposited: 20 Jan 2021 12:18
Last Modified: 20 Jan 2021 12:18
URI: http://repository.usp.ac.fj/id/eprint/12555
UNSPECIFIED

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