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Public Expenditure and its impact on Economic Growth: A case of Pakistan

May 2019

Authors:

University of Lahore

The public expenditures are very important and basic necessities of every country. It plays crucial and dynamic role in each economy and government has responsibility to provide them. This study examined public expenditures impact on economic growth by using time series data from1982-2017 in case of Pakistan. The variables are growth rate as GDP, development expenditure, defense expenditures, health expenditures and education expenditures. The ordinary least square (OLS) test and CUSUM, CUSUM Square tests are applied to check relationship between public expenditures and economic growth. This study concludes with mix results, which indicates that there is a significant positive relationship between development and health expenditures on economic growth. Furthermore, defense and education expenditures have negative relationship on economic growth. Moreover, it is recommended that public expenditures should be used in appropriate way; if it is not used in accurate place it would not be favourable for Pakistan economy.

Unit Root Test

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Kashmir Economic Review

Vol. 26, No.1, Jan – June, 2017

Public Expenditure and its impact on Economic Growth: A case of Pakistan

Sadıa Ejaz

, Hina Amır

and Malik Shahzad Shabbir

Abstract

The public expenditures are very important and basic necessities of every country. It

plays crucial and dynamic role in each economy and government has responsibility to provide

them. This study examined public expenditures impact on economic growth by using time series

data from1982-2017 in case of Pakistan. The variables are growth rate as GDP, development

expenditure, defense expenditures, health expenditures and education expenditures. The ordinary

least square (OLS) test and CUSUM, CUSUM Square tests are applied to check relationship

between public expenditures and economic growth. This study concludes with mix results, which

indicates that there is a significant positive relationship between development and health

expenditures on economic growth. Furthermore, defense and education expenditures have

negative relationship on economic growth. Moreover, it is recommended that public

expenditures should be used in appropriate way; if it is not used in accurate place it would not be

favourable for Pakistan economy.

Keywords: public expenditures, economic growth, ordinary least square, Pakistan

JEL Codes: H50, H60, O50

1. Introduction

The public finance is deliberated actual of public policies targeted to improving economic

growth. However, relatively these policies are accomplished over public expenses and returns.

Therefore, knowledge related to trend, landscape and grade of the sound effects of variations in

public spending on economic growth has energetic significance such as, capital goods,

consumption goods and personnel expenditures include in public expenditures (Valentino Piana

2001). Theoretically, there are two opposite views of Keynesian and Wagner’s about association

among economic growth and domestic revenue. Through law of Wagner’s (1890) by increasing

Comsat Unıversıty, Lahore

(Corresponding Author) University of Brunei Darussalam

Kashmir Economic Review

Vol. 26, No.1, Jan – June, 2017

real per capita income public expenditures also increase. Causation must run from domestic

revenue to public expenditures and by increasing economic growth public spending also

increased. Though according to Keynesian economic growth is due to public expenditures and it

is an independent variable. Moreover, Keynes thoughts for improving economic growth (both

short and long run) public expenditures must be increased. According to Keynesian views

causality must run from government expenditures to national income. (Muhammad et al 2015).

However, economic inequalities act as an authoritative role in manipulating of goods and

services that are sponsored by municipal segment either that inequality is actual or perceived.

The public expenses on foreign aid, research and development, roads, defense, police and fire

services, have gains for all residents Shabbir and Rehman (2015). Furthermore, these expenses

do not openly impress the welfare of household apart from those directly involved in these

activities (Schwabish et al 2004). This analysis contains 51 developing countries by faculty at

International Monetary funds (IMF) establishes reliable association all-around the countries,

approving “a long-term relationship between government spending and output consistent with

Wagner’s law” (David Hall 2010). The public expenditures are basic aspect in economic growth

and enlargement. These are vital for funding structure, comprising road and rail network, energy,

and water facilities. It supplies schooling and health facilities vital for current marketplaces more

proficiently and effectively rather than the flea market might offer. In OECD countries

expenditure is great intensities of 40% of GDP and growing in emerging countries (David Hall

2010).

However, progressivity and regressively of public spending can be interpreted through

comparing the benefit concentration curve with 45 degree sloping as well as the ordinary curve

based on income and consumption. If the concentration curve is above the standard curve for

income and consumption but under the 45-degree line then remunerations from public spending

can be progressive. The concertation curve that fulfils this condition can be concave or convex.

But remunerations from public spending can be regressive when benefits are not distributed

equally than income and consumption (Chakraborty et al 2013).

Figure 1: Progressivity or Regressively of a Public Spending:

Kashmir Economic Review

Vol. 26, No.1, Jan – June, 2017

Total public expenditures in 1980s were 122153.9 million rupees according to handbook of

statistics of Pakistan economy. In 1990s total expenditures were 426506.5 million rupees. Both

figures of millions rupees show a significant increase in overall amount in one decade. In 2000s

this amount increased rapidly and reaches to 1174192.4 million rupees. In this era government

enhanced public expenditures and give subsidies to people as well. These significant increases in

public expenditures indicate a favorable ground for economic growth in Pakistan. The private

consumption expenditures are 79.20% of GDP and public consumption expenditures are 11.84%

of GDP. In outgoing fiscal year total consumption expenditures were 91.04% as compared to

91.46% of last fiscal year. In 2013-14 total expenditures were Rs.3, 446.2 billion but in July-

March 2014-15 it was 3731.6 billion, hence it increased with 8.3% growth rate on annual basis

Shabbir (2016). This study tends to investigate the impact of public expenditures on economic

growth. It shows at which level public expenditures are significant or which variable is positively

Kashmir Economic Review

Vol. 26, No.1, Jan – June, 2017

affect or negatively effect on economic growth. However, defense, development, health and

education are independent variables and GDP is used as per alternative of economic growth.

The analysis of this study is a new contribution in existing literature of public expenses and

economic growth through inspecting the effect of public outlays on economic growth, using such

variables as development, defense, education and health expenditures as an explanatory variables

and GDP as a dependent variable. Some of previous studies used education and health

expenditures in their studies but only these two variables can’t properly explain relationship of

public expenditures and economic growth. So this study enhances two more variables such as

development and education to check this relationship more accurately and effectively in the

context of Pakistan. Finally, this study fills the gap of existing studies with adding new more

variables and latest data set.

2. Literature Review

Desmond et al ., (2012) examined the effect of public expenditure on economic growth for

period 1970-2009, where they took variables as, GDP, government capital and recurrent

expenditures on economic services, social and community services and transfers. They were also

using OLS method for data analysis. However, investment and regular expenses on economic

services had adverse effects and investment expenditure has transferred the progressive impact

on economic growth. Al-Shatti (2014) examined the impact of public expenditure on economic

growth in Jordan during 1993-2013 by taking capital spending on education, expenditures on

health, spending on economic affairs and also spend on housing and community utilities using

OLS, augmented dickey fuller (ADF) tests. The present investment expenses on education have

negative effect, while expenses on economic concerns and health has positive effect.

Yilgör et al., (2012) examined the relationship between public expenditure and economic growth

for period 1980-2010 by using ADF, Philips Perron (PP) and Granger Causality tests on current

expenditures, transfers expenditure and investment expenditures. Their study revealed the results

that uni-causality was found from current, transfers and total expenditures to economic growth.

In order to ensure growth in Turkey’s economy, controlled increases should be realized in forms

of public expenditure. Patricia and Izuchukwu (2013) in Nigeria find out the effect of public

expenditures on education from 1977-2012 and GDP using VECM and ADL methods. The result

Kashmir Economic Review

Vol. 26, No.1, Jan – June, 2017

showed education expenditure having positive impact on growth rate. Whereas, government

should reduce recurrent expenditure and enhance capital expenditure but also increase

expenditure on education as it influence growth rate positively.

Egbetunde and Fasanya (2013) examined public expenditure impact in Nigeria during 1970-2010

on total expenditure, capital expenditure and recurrent expenditure using ARDL approach. The

result showed that total public spending impact on growth is negative and recurrent expenditures

having positive impact. Oyinlola and Akinnibosun (2013) examined the relationship between

public expenditure and economic growth in Nigeria during 1970-2009 on recurrent expenditures,

capital expenditures, administrative expenses, community and social services and transfers using

ADF and Phillips Perron (PP) tests. The long run elasticity result showed that there is negative

impact of recurrent expenditures, administrative expenses and transfers expenditures and positive

impact of capital expenditures as well as social and community services.

Alexiou (2009) provided evidence on economic growth and government spending in South

Eastern Europe. The variables consist on capital formation, development assistance, private

investment, and trade openness and population growth using pooled cross-section/time-series

data of 113 countries. The results indicate that there is a significant and positive effect on

economic growth by development assistance, government spending on education, trade openness

and private investment. And statistically significance shows in population growth. Bose et al

(2003) found out the growth effects of government expenditure for a panel of thirty developing

countries over the decades of the 1970s and 1980s on current and capital expenditures. Initially,

the government capital expenditures are positive and considerably associated with economic

growth but current expenditures are insignificant. Furthermore, overall expenditures and

investment are solitary expense should be considerably related on growth at sector level when

variables are taken into consideration that are omitted variables and budget constraint.

Asghar et al., (2011) examined the relationship between public spending in community sector

and GDP during 1974-2008 in Pakistan, where they took variables as income per capita,

education, health, law and order expenditures, subsidies and economic and community services

by using ADF, PP, KPSS, Ng-Perron tests, VECM and Johansen co-integration tests. The

outcomes of the study revealed the progressive correlation of social investment expenditures and

Kashmir Economic Review

Vol. 26, No.1, Jan – June, 2017

community services with GDP. However, expenses on law and order and subsidies showed

negative relationship with economic growth.

Rauf et al., (2012) examined the Wagner’s law causality among community spending and

domestic earnings and applicability during 1979-2009 data. Whereas, ADF, PP, ARDL

approach, Todo-Yamamoto approaches have been used. The research concluded no existence of

long run correlation among community spending and domestic earnings collectively. Moreover,

causation outcomes declared no causal relationship from community spending to domestic

earnings and domestic earnings to community spending. Muhammad et al (2015) inspected

influence of expenses on GDP consuming annually statistics from 1972-2013 in Pakistan. ADF

method was used to check stationarity of the data. To inspect the association between given

variables (expenditures and economic growth) Johansen co-integration and Granger causality

tests were applied. In Pakistan observed research didn’t care Keynesian and Wagner theory for

observed period and there were no long run relationship between expenditures and economic

growth.

Gisore et al., (2014) examined the government expenditure contributes to economic growth in

East Africa from 1980 to 2010 by applying Levin-Lin-Chu (LLC) and unit root tests. However,

this implied the Hausman (1978) test to reinforce the application of the balanced panel fixed

effects model in this analysis. The findings showed that expenditures on health and defense to be

positive and statistically significant effect on growth. In contrast, education and agriculture

expenditure were insignificant. Aladejare (2013) examined the relationship and dynamic

interactions between government capital and recurrent expenditures and economic growth in

Nigeria over period 1961-2010 using VECM, Granger causality tests, ADF and PP tests. The

government capital spending is more significant than government recurrent expenditure.

Moreover, government recurrent expenditure indicates negative effect on growth in the economy

while capital spending has positive effect.

According to previous studies on economy growth would be increased by increasing public

expenditures and human capital is a best measure to determine public expenditures and economic

growth relationship. However, increasing spending on economic growth obviously increased and

this can be acquired by doing more spending on it and became useful in production of goods and

services. While many researchers used only education as a public expenditure to measure

Kashmir Economic Review

Vol. 26, No.1, Jan – June, 2017

relationship between economic growth and public expenditures and this indicator has many

doubts and education expenditures can’t give short run return, so only education is not best

measure to check relationship between economic growth and public expenditures as a whole.

This study used education, health; defense and development expenditures to measure this

relationship and these variables are more convenient and can give accurate results in the context

of Pakistan economy.

3. Methodology

This study examines the impact of public expenditures on economic growth in Pakistan.

However, time series data is used from 1982 to 2017 and collected from handbook of statistics of

Pakistan for the variables of development, defense and health expenditures. Moreover, rest of

data on education expenditures and GDP is taken from World Bank Indicator (WDI). There is

one dependent variable that is GDP used in the model. The GDP is used as a percentage of GDP

and as a proxy of economic growth. Many previous studies have been used GDP as proxy of

economic growth in their studies. There are four independent variables used in the study. The

variables are defense expenditures (DEF), development expenditures (DEV), education

expenditures (EDU) and health expenditures (HEA). The education is measured as a percentage

of GDP. Many studies have been used education and health variables but we didn’t find any

study used defense, development, education and health expenditures collectively. This study

addresses following hypothesis

Hₒ = there is no relationship between public expenditures and economic growth

H₁ = there is a relationship between public expenditures and economic growth

The model of the study is given as below.

𝐼𝑛𝐺𝐷𝑃 = 𝛽ₒ + 𝛽₁𝐼𝑛(𝐷𝐸𝐹) + 𝛽₂𝐼𝑛(𝐷𝐸𝑉) + 𝛽₃𝐼𝑛(𝐻𝐸𝐴) + 𝛽₄𝐼𝑛(𝐸𝐷𝑈) + 𝜇ₒ

Where:

GDP: gross domestic product

DEF: defense expenditures

DEV: development expenditures

HEA: health expenditures

EDU: education expenditures

Kashmir Economic Review

Vol. 26, No.1, Jan – June, 2017

4. Results and Discussions

The econometric techniques are used to check relationship between public expenditures and

economic growth. Moreover, statistical analysis is used to test the hypothesis as well. The details

steps for analysis are these:

Unit Root test

 ADF test

Ordinary Least Square test (OLS)

Stability tests

 CUSUM test

 CUSUM Square test

4.1 Unit Root Test

In order to find out the association of dependent and independent variables, first unit root test is

applied to check the stationary of variables. For unit root test ADF test is most commonly used.

The outcomes indicate that all variables are not stationary at level, so we take log of all variables

and after taking log all variables become stationary at level I (0). Furthermore, simple OLS

technique is applicable on this study.

Table 1: Unit Root Test

Variables

C&T

GDP

-3.173

(0.032)

-3.592

(0.048)

DEF

-3.241

(0.027)

-2.634

(0.269)

DEV

-4.431

(0.0015)

-5.177

(0.001)

HEAL

-5.604

(0.0001)

-5.724

(0.0003)

EDU

-6.009

(0.0000)

-5.950

(0.0002)

Kashmir Economic Review

Vol. 26, No.1, Jan – June, 2017

4.2 Ordinary Least Square test (OLS)

Variables

Coefficient

Std. Error

T-Statistics

Probability

4.813

1.457

3.303

0.003

LEDU

-0.406

0.328

-1.238

0.227

LDEV

0.351

0.176

1.998

0.057

LDEF

-0.542

0.184

-2.952

0.007

LHAEL

0.394

0.191

2.065

0.049

R squared

0.431

F-statistic

4.632

Adjusted R-

squared

0.312

Prob (F-statistic)

0.013

The OLS regression results indicate that development shows significant positive impact on GDP

growth rate. It means that on average other things remain constant 1% rise in development will

cause to 0.35% increase in GDP. Due to increase in development the infrastructure etc; of the

economy can positively affect the GDP of the economy. Moreover, health expenditures show

significant positive impact on GDP growth rate. It means on average other things remain

constant 1% rise in health causes to 0.39% rise in GDP. It will better affect the health of people,

which cause enhanced the growth rate and increase in GDP or growth rate. The healthy people

can contribute in best way to increase economic growth. While, rest of both variables indicates

such as defense and education expenditures insignificant negative results. Moreover education

expenditures give return in long run. The R square shows goodness or fitness of the model and

43% independent variables explained by the dependent variable. Finally, F-statistic is significant

at 5% level as p-value is less than 0.10.

4.3 CUSUM Test

The Pesaran and Shin (1999) estimated the constant of error correction model, which must also

be obviously examined. In graphs image of the Cumulative Sum (CUSUM) and the Cumulative

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Vol. 26, No.1, Jan – June, 2017

Sum of Square (CUSUMSQ) of the recursive residual are also documented. The cumulative sum

(CUSUM) and cumulative sum of squares (CUSUMSQ) designs, which is presented in figure 1

from a recursive estimation of the model also show constancy in the coefficients over the trial

era.

Figure 2: CUSUM

-15

-10

-5

86 88 90 92 94 96 98 00 02 04 06 08

CUSUM 5% Significance

Figure 3: CUSUM Square

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

86 88 90 92 94 96 98 00 02 04 06 08

CUSUM of Squares 5% Significance

The CUSUM test shows the constancy of the limitations. According to our outcomes it indicates

blue line lie between the red region means that our parameters are stable. The second figure

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Vol. 26, No.1, Jan – June, 2017

indicates the blue line lies outside the red line in time period from 1994 to 1998; it may be due to

some economic shocks. In this time period may be economy faced some shock and due to that

parameters are showing instability.

4.4 Descriptive Analysis

The descriptive analysis of four independent variables is mentioned in below table. Where,

mean, standard deviation, minimum and maximum values of 36 observations are included in this

table. The defense and development values are in thousands while health and education values

are in percentages. However, mean value of defense expenditures is 117820.4, standard deviation

is 95384.28, minimum value is 10168 and maximum value is 378135. Furthermore, mean value

of development expenditures is 52736.25, standard deviation is 83309.38, minimum values are

4616 and maximum value is 316446. The least but not last the value of health is 0.748, 0.172,

0.51 and 1.19 for mean, standard deviation, minimum and maximum respectively. Finally, values

for variable education consists of 2.427, 0.302, 1.837 and 3.022 mean, standard deviation,

minimum and maximum values respectively.

Table 2: Descriptive Analysis

Variables

Observation

Mean

Standard

Deviation

Minimum

Maximum

Defense

117820.4

95384.28

10168

378135

Development

52736.25

83309.38

4616

316446

Health

0.747

0.172

0.51

1.19

Education

2.426

0.302

1.838

3.022

5. Conclusion and Recommendations

The public outlays show very significant title role in economic growth of every country and it is

compulsory for every country because it demands from general people. The public expenditures

Kashmir Economic Review

Vol. 26, No.1, Jan – June, 2017

should be completed in better and appropriate way and on deserving place. There is significant

amount of literature is available on community expenses and economic growth. In some studies

GDP used as proxy for economic growth, whereas most of literature shows positive effect on

GDP by public expenditures in emerging and developed countries as well. But few studies

showed negative impact of some variables also. Al-Shatti (2014) and Gisore et al (2014) results

showed negative effect of education expenditures and GDP.

This analysis is an addition to literature and it describes the public expenditures impact on

economic growth in Pakistan. It shows which variable is positively affected and which variable

is negatively effect on economic growth. However, education, health, development and defense

expenditures collectively used in this study, which is not used in previous studies and this gap is

filled by our study. The time series data is used and stationarity unit root test is applied to

identify the stationary and non-stationary among variables at constant or trend level. Finally

simple OLS method is applied and the results show that there is progressive association among

development expenditures, health expenditures and GDP, while defense and education

expenditures variables indicate negative impact on economic growth. This study concludes with

these remarks and recommends that public expenditures should increase on development and

health expenditures rather than education and defense expenditures. These education and defense

expenditures are also important but government should increase spending on health facilities and

on development services. These expenditures can be helpful to increase economic growth.

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www.economicswebinstitute.org/glossary/pubexp.htm

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The present study is designed to examine the relationship between wage inequalities and economic prosperity in the case of Pakistan. Using provincial-level data for the years 2000 to 2020, the study estimated a multivariate regression model by employing Auto Regressive Distributive Lag (ARDL) pooled mean group (PMG) technique. The results reveal that wage inequality, government development spending, labor force participation, and human development significantly affect economic prosperity. It is concluded that gender disparity in the labor market is the main hurdle in the economic wellbeing of the masses in the country. Reducing the differences in wages will enhance overall economic prosperity. The government and private sector should take collaborative measures to reduce wage disparities between the male and female workforce. The study also suggests that government should increase development expenditure, especially on health, education, and social infrastructure, to increase economic prosperity. © 2022 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license.

Environmental Effects of China’s Overseas Direct Investment in South Asia

Article

Jan 2022

This paper attempts to analyze the effects of China’s outward direct investment on environmental pollution in selected South Asian countries from 2004 to 2019 under framework of environmental Kuznet curve hypothesis. This empirical work is accomplished through fully modified ordinary least square. The findings of the full panel of fully modified ordinary least square indicates that China’s outward direct investment significantly spurs carbon emissions by (9.9%), which destroy the environment quality in the region. However, the estimated coefficients of the full panel of the fully modified ordinary least square indicates that (+) and (−) values of GDP and GDP square validate the environmental Kuznet curve hypothesis existence in the South Asia economies. Furthermore, when taking the individual countries, the environment consequences, individual characteristics of the countries and the GDP growth shows various temporal pattern of KEC hypothesis. Like in India there exist inverted U-shape curve, while Pakistan and Nepal manifest U-shape curve, whereas Bangladesh shows N-shape curve. Furthermore, this paper has identified bidirectional causality between economic growth, energy, financial development and carbon emissions. The empirical evidence implies that when governments consider foreign direct investment, they should priorities environmental protection mechanisms.

Does Innovation Have an Impact on Economic Policy Uncertainty? Evidence From the Emerging Markets

Research

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Jan 2021

Nexus between economic growth and foreign private investment: Evidence from Pakistan economy

Article

Full-text available

Jan 2021

This study examines the impact of economic growth along with taxes, technology, trade openness and exchange rate on the sustainability of foreign private investment (FPI) in Pakistan. This study uses random effects and generalized least squares estimators and contains data set starting from 1996 to 2017. The results indicate that the Pakistan economy has vastly positive influenced regarding the location and choice of emerging and developed countries’ investment in the domestic market. Furthermore, emerging and developed economies investment increases the contribution among domestic firms to the national economy. The results, which are consistent across models, indicate that Pakistan’s economy is more likely to receive FPI from emerging and developed economies, but the relative intensity of local government efforts, regardless of economic size. Moreover, an increase in likelihood will generate FPI from developed countries.

Selection of Variables in Data Envelopment Analysis for Evaluation of Stock Performance

Article

Full-text available

May 2021

Data envelopment analysis (DEA) is a relative measurement technique used to evaluate the efficiencies of a homogeneous group of samples with multiple inputs and/or outputs. DEA can be highly effective when right variables are chosen. The objective of this study is to identify the most appropriate variables for DEA to evaluate stock performance and find the efficient ones from a pool of stocks. Evaluation of stocks are carried out either by assessing their financial strength or by assessing their past price behaviour in the secondary market or both. In any case, it is imperative to use suitable variables to evaluate the performance of stocks. For this purpose, three different combinations of variables were tested on 69 non-financial stocks listed in the National Stock Exchange (NSE), which were selected based on their market capitalization. The results obtained suggest that all the three sets of variables taken for the study help in the identification of efficient stocks. The average returns of the stocks selected in all the three cases are higher than the market return. Among the three sets, stocks identified using the past price behaviour give a higher return when compared to the other two sets. The study can help academicians and investors to percolate efficient stocks from a large pool of stocks. The selected stocks can be further analysed to construct an effective portfolio.

The dynamic impacts of environmental-health and MDR-TB diseases and their influence on environmental sustainability at Chinese hospitals

Article

Full-text available

Jun 2022
ENVIRON SCI POLLUT R

The purpose of this study is to identify at what extent multidrug-resistant tuberculosis (MDR-TB) diseases effect on environmental health issues in selected provinces of Chinese hospitals. In survival analysis approach, this study employs the Cox proportional hazard model (CPM) to incorporate the duration of event, probability of occurrence of an event, and the issue of right censoring. An advantage of using CPM is that one does not need to specify the distribution of baseline hazard H0 (t) as it considers a common value for all units in population. The results indicate that male and travel expenditures have negative association with the duration of cure. Furthermore, the medical expenditures and the spatial characteristic of time expenditure have positive association with the duration of cure of MDR-TB patients. The inconsistent behavior of males in taking medicines as compared to females and males is also more prone to tuberculosis (TB).

Does sustainable environmental agenda matter? The role of globalization toward energy consumption, economic growth, and carbon dioxide emissions in South Asian countries

Article

Full-text available

Jan 2022
Environ Dev Sustain

This study attempts to explore the environmental impacts of globalization under the umbrella of the EKC (environment Kuznets curve) approach in South Asia. For this reason, this study investigates the causality between energy usage and growth-driven CO2 emanations. The study adopts the FMOLS (fully modified OLS) technique for the econometric assessment, which portrays a significant demolish of environmental well-being in the region, whereas individual country, such as Nepal, also demonstrates a positive and significant effect of non-environmentally friendly power and globalization index on CO2 emanations. Nonetheless, negative as well as positive signs of GDP and its square (GDP)², respectively, validate the EKC theory in the sample region. Furthermore, the empirical finding reveals the feedback effect between economic growth (GDP) and energy usage. Despite this, GDP Granger causes CO2 emanations.

The effects of Environmental Kuznets Curve toward environmental pollution, energy consumption on sustainable economic growth through moderate role of technological innovation

Article

Full-text available

Jan 2022
ENVIRON SCI POLLUT R

South Asia is a hub for encompassing air contamination, with 37 of the top tiers of the 40 most contaminated urban communities around the globe (IQAIR, 2020). From this perspective, this research aims to explore the validity of the Environmental Kuznets Curve while controlling for the impacts of technological innovation and energy consumption on the sustainable economic growth–environmental pollution nexus in the backdrop of South Asian economies by using panel dataset from 1998 to 2018. Therefore, this analysis adopts a fully modified ordinary least square (FMOLS) approach for examination, which affirms the EKC hypothesis existence, suggesting that the environment in South Asia is deteriorating while technological innovations have moderated the impact. Moreover, the empirical findings indicate that energy consumption as well as technological innovations both have a significant positive impact on the CO2 emanations, which harms biodiversity.

Philosophy behind Islamic Economics: Limited Desires and Unlimited Resources

Article

Full-text available

Dec 2020

The most famous definition of economics among modern academicians and economists is a branch of science which deals with the study of the relationship between limited resources and unlimited wants or desires. Under the shadow of this definition, there are different types of conventional economic systems included relativism, utilitarianism, and universalism, etc. This study has been introduced in the economic world through an evolution process. There is a dominant feeling within the Muslim elites that either Islam is unable to respond to complex contemporary challenges in the fields of trade and economics or its economic concepts are old and outdated. Both of these perceptions are incorrect. The real philosophy, concept, and definition of Islamic economics are based on limiting desires and unlimited resources which are supported by Quran and Hadith. The beauty of Islamic economics is based on limited desires and unlimited resources. This concept of Islamic economics can share the risk of profit and loss in their business. Islamic banks with this revolutionary approach will feel at ease in implementing Shari’ah-based finance and offer risk-sharing products and services.

Impact of government expenditure on education: The Nigerian experience

Article

Full-text available

Jan 2014

Nigeria has over the years invested substantially to improve the educational attainment of the labour force and to raise productivity but yet still faces declining real output and slow economic growth. The paper focuses on the impact of education expenditure on economic growth as a means of achieving the desired socioeconomic change needed in Nigeria. The study uses time series data from 1981 to 2012. The Johansen's co-integration analysis and ordinary least square (OLS) econometric techniques were used to analyze the relationship between gross domestic product (GDP) and recurrent education expenditure. Findings indicate that though a positive relationship subsists between education expenditure and economic growth, but a long run relationship does not exist over the period under study. The study observed that this puzzle is attributable to 'labour market distortions, redundancy of the workforce, industrial dispute and job discontinuities as well as leakages in the Nigerian society such as. brain drain, among others. In conclusion, the above study has shown that educational sector has not been productive as expected. This is evidenced by the poor quality of graduates, increasing cases of cultism in schools and high rates of drop-outs. The paper further suggests the improvement of the education system through efficient use of public resources through good governance, accountability and transparency. Also, efforts should be made by policy makers to come up with policies that would check,preserve and protect the plight of educational capital to other countries.

Capital Expenditure at Disaggregated level and Economic Growth in Nigeria: An Empirical Analysis

Article

Full-text available

Jan 2013

The main objective of this paper is to examine the partial and joint effects of disaggregated capital expenditures on economic growth in Nigeria. The study is perceived on the causal effect between government expenditure and economic growth. Annual time-series data coverage 1981-2013 for capital expenditure on education, health, agriculture and road construction were analyzed using ordinary least square multiple regression model to predict economic growth. The Data were obtained from the Central Bank of Nigeria Statistical Bulletin. Cointegration and VECMs were applied in estimating the data to test the long-run and short-run effect of the variables on the economic growth. Granger-causality tests were conducted to ascertain the cause-effect of the variables. Results indicate there exists long-run positive relationship between economic growth and capital expenditure on education and road; while there is long-run negative relationship between economic growth and capital expenditures on agriculture and health. Results also indicate there is unidirectional causal effect running from economic growth to capital expenditure on agriculture and road construction; while at the same time a unidirectional causal effect runs from capital expenditures on education and health to economic growth. The adjusted R 2 is 33% indicating that greater proportion of the issues in economic growth is not explained by capital expenditure in Nigeria. Recommendation is that government should review its monitoring mechanism to ensure adequate and prudent management of funds.

The Impact of Financial Development on Economy of Pakistan

Article

Full-text available

Mar 2016

This study aims to examine the impact of financial development on economy sector of Pakistan. Regional economic growth and financial development cycles can trace major global and unobserved factors evolved overtime. However, economic growth and financial development are explaining the fluctuations in the economy, which plays an important role for development of any economic sector. Whereas, Augmented Dickey Fuller Test (ADF) and Phillips Perron (PP) test are used to check the individual stationarity of each variable. Augmented Dickey Fuller test is used to estimate the unit root test. Johnson co-integration test is also used to check the long run relationship between the variables. The overall results shows a positive significantly impact of financial development on economic growth of Pakistan, expected some years of nineties when stock markets became in negative figure. However, F-statistics shows overall positive significant impact of the model.

The Impact of Financial Crises and Economic Growth of East Asian Countries

Article

Full-text available

Apr 2016

In last quarter of 1997, the economic crises came in the East Asian countries. However, the countries those are affected by these crises are Malaysia, South Korea, Indonesia, Japan, Philippians, Thailand and Taiwan. The reason behind these crises were due to miss management of economic system and bankruptcy because mostly bank became corrupt during these crises and real GDP effected by these crises, whereas GDP in some countries are less effected as compared by the remaining countries after the crises in 2000. But the investment ration fell during that period, whereas, a comparative analysis are done in this paper that showed the investment ratio decreased during the period but slightly recovered after the crises. We explored the growth of the Asian economy and determinants of the economic growth before and after the crises. In the first part of the paper, we review the East Asian economy before 1997 while in second part we discuss the crises development of East Asia countries after the crises. The crisis resulted in the stock market values have failed to pre-crisis values retain is supported by the result. A picture of currency and banking crises exhibited a slightly different image study in the result.

An Empirical Examination of the Relationship between Government Spending and Economic Growth in South Africa, from 1980 to 2011

Article

Full-text available

Sep 2013

The paper empirically examines the relationship between government expenditure and economic growth in South Africa, for the period 1980 to 2011. Econometric techniques are applied to test the hypothesis that an increase in government expenditure has increased economic growth. The study examines the causal relationship that exists between government spending and economic growth in South Africa using OLS regression techniques. Secondary data obtained from the SARB is used for data analysis. The results confirm a long-run positive relationship which exists between the two variables under study, and further shows that gross capital formation granger causes economic growth. DOI: 10.5901/mjss.2013.v4n3p235

Nigerians Total Government Expenditure: It’s Relationship with Economic Growth (1980-2012)

Article

Full-text available

Jul 2014

This paper investigates the relationship between Nigeria’s total expenditure and economic growth from 1980- 2012. This study makes a modest contribution to the debates by empirically analyzing the relationship between Nigeria total government expenditure and its contribution to economic growth, using time series data from 1980 to 2012, obtained from the Central Bank of Nigeria Annual Report and Statement of Account and Federal Office of Statistics. It employs the Engle-Granger two step modeling (EGM) procedure to co-integration based on unrestricted Error Correction Model and Pair wise Granger Causality tests. From the analysis, our findings indicate that GDP and total government expenditure are cointegrated in this study. The speed of adjustment to equilibrium is 44% within a year when the variables wander away from their equilibrium values. Based on the result of granger causality, the paper concludes that a very weak causality exist between the two variables used in this study. Therefore, the policy implication of these findings is that any reduction in total government expenditure would have a negative repercussion on economic growth in Nigeria. DOI: 10.5901/mjss.2014.v5n17p67

Is Fiscal Policy Effective in Generating Higher Real Output? A Case of Pakistan

Article

Dec 2013

Keeping in view the objective that is to observe the usefulness of fiscal policy on real GDP of Pakistan, the study collects time series data from 1976 to 2012 through reliable sources of statistical bureaus of Pakistan. Using Johansen Cointegration test, the long run results demonstrate investment and government expenditure as raising factor for real GDP of Pakistan while GDP Deflator and government revenue as de-motivating factor for real GDP of Pakistan in the long run.

The Impact of Public Expenditures on Economic Growth in Jordan

Article

Sep 2014

Ali Sulieman Al-Shatti

This research aims to examine the impact of the public expenditures on economic growth in Jordan during the time period (1993–2013), by determining the contribution of the current and capital expenditures on Education, Health, Economic Affairs, and Housing and community Utilities as a percent of the total public expenditures, and then examining the impact of each one of them on economic growth in Jordan. Two mathematical models have been designed to measure this impact, the first one measures the impact of current functional expenditures, and the second model measures the impact of capital functional expenditures on economic growth in Jordan. The empirical results show that the impact of current and capital expenditures on education has failed to enhance economic growth, and that is due to the high cost of education, especially higher education in the private sector in Jordan, as well as the growing rate of unemployment, and expenditures on health and economic affairs should be encouraged due to their positive impact on economic growth.

Causality between public expenditure and economic growth: The indian case

Article

Dec 2013

P. Srinivasan

This study investigates the causal nexus between public expenditure and economic growth in India using cointegration approach and error correction model. The analysis was carried out over the period 1973 to 2012. The Cointegration test result confirms the existence of long-run equilibrium relationship between public expenditure and economic growth in India. The empirical results based on the error-correction model estimate indicates one-way causality runs from economic growth to public expenditure in the short-run and long-run, supporting the Wagner's law of public expenditure.

Government Expenditure And Economic Growth In Nigeria, 1970-2008: A Disaggregated Analysis

Article

Jan 2010

The paper observes that rising government expenditure has not translated to meaningful development as Nigeria still ranks amongworld’s poorest countries. In an attempt to investigate the effect of government expenditure on economic growth, we employed adisaggregated analysis. The results reveal that government total capital expenditure (TCAP), total recurrent expenditures (TREC), andgovernment expenditure on education (EDU) have negative effect on economic growth. On the contrary, rising governmentexpenditure on transport and communication (TRACO), and health (HEA) results to an increase in economic growth. The authors’recommendations include among others the following. Government should increase both capital expenditure and recurrentexpenditure, including expenditures on education, as well as ensuring that funds meant for the development of these sectors areproperly managed. Secondly, government should increase its investment in the development of transport and communication, inorder to create an enabling environment for business to strive. Thirdly, government should raise its expenditure in the developmentof the health sector since it would enhance labour productivity and economic growth. Lastly, government should encourage andincrease the funding of anti-corruption agencies in order to tackle the high level of corruption found in public office.