Title: Government spending and economic growth in SAARC: evidence from panel cointegration

Authors: Rudra P. Pradhan

Addresses: Indian Institute of Technology Kharagpur, Vinod Gupta School of Management, Kharagpur, West Bengal 721 302, India

Abstract: The study examines the nexus between government spending and economic growth in the seven SAARC countries, namely Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka, for the period 1970-2007. Using panel cointegration and panel causality, the paper finds that government spending and economic growth is cointegrated, indicating the existence of long run equilibrium relationship between them. It also confirms the presence of bidirectional causality between government spending and economic growth, both in the short run and long run, except Pakistan and Sri Lanka. The implication of this paper is that increased government spending is both cause and consequence of increased economic growth.

Keywords: government expenditure; economic growth; panel cointegration; Bangladesh; Bhutan; India; Maldives; Nepal; Pakistan; Sri Lanka.

DOI: 10.1504/IJEPEE.2011.038874

International Journal of Economic Policy in Emerging Economies, 2011 Vol.4 No.1, pp.78 - 94

Received: 23 Oct 2009
Accepted: 07 Nov 2010
Published online: 11 Jan 2015 *

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