The Impact of Public Expenditure Components on Economic Growth in Ethiopia; Vector Autoregressive Approach

Endaylalu Solomon

doi:doi:10.11648/j.ijber.20190804.16

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The Impact of Public Expenditure Components on Economic Growth in Ethiopia; Vector Autoregressive Approach

Endaylalu Solomon

Published in International Journal of Business and Economics Research (Volume 8, Issue 4)

Received: 12 June 2019 Accepted: 10 July 2019 Published: 26 July 2019

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Abstract

The study analyzes the impact of public expenditure components on economic growth in the Ethiopian economy using annual time series data for the period 1982-2016. The study uses public expenditure variables from economic infrastructures (agriculture, road and energy), social infrastructure (education) and recurrent and capital expenditure components. With the help of co-integration and vector error correction analysis, the impact of various areas of public expenditures was assessed in the long-run as well as in the short-run. The study found that public expenditure components at all have a significant positive effect on economic growth in the long-run but they have insignificant impact in the short-run except education and road. Expenditure on education and road has both short-run and long run effects on economic growth. The impact of educational expenditure on economic growth is highly significant and positive which have powerful role in promoting the country’s economic growth compared to other variables. In the short run the impact of education on economic growth is negative and significant whereas that of road expenditure is significant and positive. Based on the results of the co-integrated and vector error correction model, this study found that, it is better and advisable to have an excessive expenditure on education and road construction than other areas of public expenditure, so as to accelerate economic growth in Ethiopia.

Published in	International Journal of Business and Economics Research (Volume 8, Issue 4)
DOI	10.11648/j.ijber.20190804.16
Page(s)	211-219
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2019. Published by Science Publishing Group

Keywords

Economic Growth, Economic Infrastructure, Public Expenditure, Social Infrastructure

References

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[5]	David Alan Aschauer, (1989), is public expenditure productive? Journal of Monetary Economics 23 (1989) 177-200. North-Holland.
[6]	David Canning & Peter Pedroni, (2004) the effects of infrastructure on long run economic growth.
[7]	Development Assistant Group Ethiopia (DAG).(2006). DAG response to PASDEP. Retrieved fromhttp://www.dagethiopia.org/index.php?option=com_content&viewarticle&id14&Itemid page; 40.
[8]	Easterly, W. (2003). National Policies and Economic Growth: A Reappraisal, Working Paper No. 27, Center for Global Development, New York University.
[9]	EViews 3.1 User′s Guide (1999), Quantitative Micro Software, LLC, 3rd Edition, USA.
[10]	George J. & J. Bratsiotis, (2005). Influential Price and Wage Setters, Monetary Policy and Real Effects, School of Economics Discussion Paper Series 0540, Economics, the University of Manchester.
[11]	Glenn D. Otto & Graham M. Voss, (1995), is public capital provision efficient? Journal of Monetary Economics 42 (1998) 47-66, School of Economics, University of New South Wales, Sydney 2052, Australia.
[12]	Harris S., and Sollis G,. (2003). Optimal taxation, economic growth and income inequality, Public Choice 115: 299–312.
[13]	John Njenga M., George K., James M. & Gideon K. Thuku, (2013) the impact of public expenditure components on economic growth in Kenya 1964-2011, International Journal of Business and Social Science Vol. 4 No. 4.
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[17]	Wahab, M. (2004). Economic growth and government expenditure: evidence from a new test specification, Applied Economics, 36, 2126–2127.
[18]	World Bank, (2004), Public Investment and Fiscal Policy; Prepared by the Fiscal Affairs Department and the Policy Development and Review Department, March 12, 2004.

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Endaylalu Solomon. (2019). The Impact of Public Expenditure Components on Economic Growth in Ethiopia; Vector Autoregressive Approach. International Journal of Business and Economics Research, 8(4), 211-219. https://doi.org/10.11648/j.ijber.20190804.16

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ACS Style

Endaylalu Solomon. The Impact of Public Expenditure Components on Economic Growth in Ethiopia; Vector Autoregressive Approach. Int. J. Bus. Econ. Res. 2019, 8(4), 211-219. doi: 10.11648/j.ijber.20190804.16

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AMA Style

Endaylalu Solomon. The Impact of Public Expenditure Components on Economic Growth in Ethiopia; Vector Autoregressive Approach. Int J Bus Econ Res. 2019;8(4):211-219. doi: 10.11648/j.ijber.20190804.16

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@article{10.11648/j.ijber.20190804.16,
  author = {Endaylalu Solomon},
  title = {The Impact of Public Expenditure Components on Economic Growth in Ethiopia; Vector Autoregressive Approach},
  journal = {International Journal of Business and Economics Research},
  volume = {8},
  number = {4},
  pages = {211-219},
  doi = {10.11648/j.ijber.20190804.16},
  url = {https://doi.org/10.11648/j.ijber.20190804.16},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20190804.16},
  abstract = {The study analyzes the impact of public expenditure components on economic growth in the Ethiopian economy using annual time series data for the period 1982-2016. The study uses public expenditure variables from economic infrastructures (agriculture, road and energy), social infrastructure (education) and recurrent and capital expenditure components. With the help of co-integration and vector error correction analysis, the impact of various areas of public expenditures was assessed in the long-run as well as in the short-run. The study found that public expenditure components at all have a significant positive effect on economic growth in the long-run but they have insignificant impact in the short-run except education and road. Expenditure on education and road has both short-run and long run effects on economic growth. The impact of educational expenditure on economic growth is highly significant and positive which have powerful role in promoting the country’s economic growth compared to other variables. In the short run the impact of education on economic growth is negative and significant whereas that of road expenditure is significant and positive. Based on the results of the co-integrated and vector error correction model, this study found that, it is better and advisable to have an excessive expenditure on education and road construction than other areas of public expenditure, so as to accelerate economic growth in Ethiopia.},
 year = {2019}
}

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TY  - JOUR
T1  - The Impact of Public Expenditure Components on Economic Growth in Ethiopia; Vector Autoregressive Approach
AU  - Endaylalu Solomon
Y1  - 2019/07/26
PY  - 2019
N1  - https://doi.org/10.11648/j.ijber.20190804.16
DO  - 10.11648/j.ijber.20190804.16
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 211
EP  - 219
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20190804.16
AB  - The study analyzes the impact of public expenditure components on economic growth in the Ethiopian economy using annual time series data for the period 1982-2016. The study uses public expenditure variables from economic infrastructures (agriculture, road and energy), social infrastructure (education) and recurrent and capital expenditure components. With the help of co-integration and vector error correction analysis, the impact of various areas of public expenditures was assessed in the long-run as well as in the short-run. The study found that public expenditure components at all have a significant positive effect on economic growth in the long-run but they have insignificant impact in the short-run except education and road. Expenditure on education and road has both short-run and long run effects on economic growth. The impact of educational expenditure on economic growth is highly significant and positive which have powerful role in promoting the country’s economic growth compared to other variables. In the short run the impact of education on economic growth is negative and significant whereas that of road expenditure is significant and positive. Based on the results of the co-integrated and vector error correction model, this study found that, it is better and advisable to have an excessive expenditure on education and road construction than other areas of public expenditure, so as to accelerate economic growth in Ethiopia.
VL  - 8
IS  - 4
ER  -

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Author Information

Endaylalu Solomon

Department of Economics, Jinka University, Jinka, Ethiopia

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Plain Text BibTeX RIS

APA Style

Endaylalu Solomon. (2019). The Impact of Public Expenditure Components on Economic Growth in Ethiopia; Vector Autoregressive Approach. International Journal of Business and Economics Research, 8(4), 211-219. https://doi.org/10.11648/j.ijber.20190804.16

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ACS Style

Endaylalu Solomon. The Impact of Public Expenditure Components on Economic Growth in Ethiopia; Vector Autoregressive Approach. Int. J. Bus. Econ. Res. 2019, 8(4), 211-219. doi: 10.11648/j.ijber.20190804.16

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AMA Style

Endaylalu Solomon. The Impact of Public Expenditure Components on Economic Growth in Ethiopia; Vector Autoregressive Approach. Int J Bus Econ Res. 2019;8(4):211-219. doi: 10.11648/j.ijber.20190804.16

Copy | Download

@article{10.11648/j.ijber.20190804.16,
  author = {Endaylalu Solomon},
  title = {The Impact of Public Expenditure Components on Economic Growth in Ethiopia; Vector Autoregressive Approach},
  journal = {International Journal of Business and Economics Research},
  volume = {8},
  number = {4},
  pages = {211-219},
  doi = {10.11648/j.ijber.20190804.16},
  url = {https://doi.org/10.11648/j.ijber.20190804.16},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20190804.16},
  abstract = {The study analyzes the impact of public expenditure components on economic growth in the Ethiopian economy using annual time series data for the period 1982-2016. The study uses public expenditure variables from economic infrastructures (agriculture, road and energy), social infrastructure (education) and recurrent and capital expenditure components. With the help of co-integration and vector error correction analysis, the impact of various areas of public expenditures was assessed in the long-run as well as in the short-run. The study found that public expenditure components at all have a significant positive effect on economic growth in the long-run but they have insignificant impact in the short-run except education and road. Expenditure on education and road has both short-run and long run effects on economic growth. The impact of educational expenditure on economic growth is highly significant and positive which have powerful role in promoting the country’s economic growth compared to other variables. In the short run the impact of education on economic growth is negative and significant whereas that of road expenditure is significant and positive. Based on the results of the co-integrated and vector error correction model, this study found that, it is better and advisable to have an excessive expenditure on education and road construction than other areas of public expenditure, so as to accelerate economic growth in Ethiopia.},
 year = {2019}
}

Copy | Download

TY  - JOUR
T1  - The Impact of Public Expenditure Components on Economic Growth in Ethiopia; Vector Autoregressive Approach
AU  - Endaylalu Solomon
Y1  - 2019/07/26
PY  - 2019
N1  - https://doi.org/10.11648/j.ijber.20190804.16
DO  - 10.11648/j.ijber.20190804.16
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 211
EP  - 219
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20190804.16
AB  - The study analyzes the impact of public expenditure components on economic growth in the Ethiopian economy using annual time series data for the period 1982-2016. The study uses public expenditure variables from economic infrastructures (agriculture, road and energy), social infrastructure (education) and recurrent and capital expenditure components. With the help of co-integration and vector error correction analysis, the impact of various areas of public expenditures was assessed in the long-run as well as in the short-run. The study found that public expenditure components at all have a significant positive effect on economic growth in the long-run but they have insignificant impact in the short-run except education and road. Expenditure on education and road has both short-run and long run effects on economic growth. The impact of educational expenditure on economic growth is highly significant and positive which have powerful role in promoting the country’s economic growth compared to other variables. In the short run the impact of education on economic growth is negative and significant whereas that of road expenditure is significant and positive. Based on the results of the co-integrated and vector error correction model, this study found that, it is better and advisable to have an excessive expenditure on education and road construction than other areas of public expenditure, so as to accelerate economic growth in Ethiopia.
VL  - 8
IS  - 4
ER  -

Copy | Download