Nand, Nitika (2024) Government expenditure and economic growth in Fiji: a disaggregated empirical analysis. The University of the South Pacific.
Full text not available from this repository.Abstract
Government expenditure and revenue generation are fundamental elements that influence a nation’s economic landscape. This thesis specifically examines the impact of government expenditure (both aggregate and disaggregate levels) on the per capita real GDP of Fiji over the period 1980-2022. Both descriptive and econometric techniques are employed for analysis with a comprehensive dataset spanning from 1980 to 2022. The descriptive part deals with the general compositions and trends of government spending, the growth patterns of the economy, and the sectoral composition of national output.
Econometric analysis is conducted by using the Auto Regressive Distributed Lag approach (ARDL). Before estimating the long-run model time series characteristic of the data is tested using ADF and PP tests and found that all the variables are integrated of order one. Then, the cointegration test was conducted using the bounds test approach, and it concluded that there is a cointegrating equation between variables. For robustness check, it includes two-stage least squares (TSLS) and instrumental variable generalised method of moments (IV-GMM) estimators.
The empirical results indicate a positive and statistically significant impact of aggregate government expenditure as a share of GDP on Fiji’s real GDP per capita. In the short run, the results are vice versa. This implies that the current system of government spending is favorable to the real GDP per capita in the long run for Fiji. Furthermore, with government budget constraints, the results indicate that when government spending is financed through tax revenue, tax revenue does not have a significant impact on GDP per capita. In contrast, when government spending is financed through a budget deficit, budget deficit has a positive and statistically significant impact on GDP per capita, implying that the economy is likely to benefit more in terms of GDP per capita.
At a disaggregate level, we find that the government expenditure allocation towards operating expenditure, wages and salaries and agriculture expenditure, have a negative effect on per capita real GDP in the long run. The government spending allocation to capital expenditure and transport and communication intends to have a positive effect on the real GDP per capita of Fiji in the long run. In terms of the government expenditure allocated to health and education expenditure, it positively affects per capita real GDP only in the short run. The outcomes of this research provide valuable insights that can assist policymakers in designing policies that can improve the impact of fiscal policies on the real GDP per capita of Fiji. Increasing government spending on capital, transport, and communication expenditures can have a positive effect on Fiji's per capita real GDP in the long run. The government can also reduce unproductive operating expenditure and wages and salaries expenditures to achieve a high level of per capita real GDP of Fiji.
| Item Type: | Other |
|---|---|
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HJ Public Finance |
| Divisions: | School of Accounting, Finance and Economics (SAFE) |
| Depositing User: | Nitika Nand |
| Date Deposited: | 06 May 2025 00:52 |
| Last Modified: | 06 May 2025 00:52 |
| URI: | https://repository.usp.ac.fj/id/eprint/14861 |
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