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The purpose of this paper is to examine the impact of the size of government and public debt on real economic growth, for a panel of 175 countries around the world.

The paper utilizes the fixed‐effects and random‐effects techniques to estimate the panel regressions.

The results indicate that both the size of government and the extent of government indebtedness have negative effects on economic growth.

The findings suggest that the authorities ought to take the necessary steps to curtail excessive government spending and public debts, in order to promote economic growth.

The contribution of the paper is its application of the fixed‐ and random‐effects techniques in modeling the relation of real economic growth to the size of government and public debt, for a panel of 175 countries around the world.

The relative size of the State in industrialized economies has increased dramatically during the past century giving rise to legitimate fears that such a trend might end up having an adverse impact on growth. This chapter explores the relationship between the development of government activities and economic growth. It starts by evoking problems related to the measurement of the public sector before reviewing statistical evidence on the long-term growth of the share of the State in the economy. It then provides a number of explanations for this phenomenon including those pertaining to the functioning of the political system itself thereby pointing toward inefficiencies. The next step is to explore the principal avenues along which government interventions can positively or negatively interfere with the growth potential of the economy. It turns out that while public expenditures – especially those responding to market failures – tend to be favorable to growth, most taxes are growth-hindering. The final part of the chapter singles out some pitfalls in the empirical investigation of this relationship. The conjecture is that the nonlinear and possibly endogenous nature of the hypothesized nexus can explain the lack of consensus in empirical studies conducted so far.

The purpose of this paper is to provide more reliable estimates of the relationship between government spending and economic growth in the European Union (EU) during the period of 1995-2015.

The methodology consisted of several different stages. In the first stage for an assessment of dynamics of government spending and economic growth indicators over two decades, descriptive statistics analysis was employed. Correlation analysis helped to identify the relationships between government expenditures (GEs) and economic growth. In the third stage, for modeling the relationship and the estimation of causality between GE and economic growth, Granger causality testing was applied.

The research indicated that eight EU countries have a significant relationship between government spending and economic growth.

This study has been bounded by general GE and economic growth only. The breakdowns of general GE on the basis of the activities they support have not been considered in this paper, which is the main limitation of the research. Despite the limitation, it might be maintained that the research highlights key relationships in the EU countries.

These insights might be useful for policy makers. In countries with unidirectional causality running from GE to economic growth, the government can employ expenditure as a factor for growth. The governments should ensure that resources are properly managed and efficiently allocated to accelerate economic growth in the countries with unidirectional causality from GDP to GE.

The commonly adopted view of the relationship between government spending and economic growth follows the Keynesian approach, in which government spending is considered to determine economic growth. However, there is another theory, which suggests that economic growth in fact determines government spending. This is Wagner’s hypothesis. The purpose of this paper is to investigate which of the two approaches applies to South Africa, and further observes the level of non-linearity between the two variables.

This study was carried out using quarterly time series data from 1980Q1 to 2015Q1. Granger causality technique was used to observe the direction of causality between the two variables, while regression error specification test (RESET) was employed to determine whether the variables exhibit linear or non-linear behaviour. This was followed by observing the threshold band, using two techniques, namely, sample splitting threshold regression and quadratic generalised method of moments.

The causality result shows that South Africa follows Wagner’s law, whereby government spending is determined by economic growth, supporting Odhiambo (2015). The RESET result shows that the variables depict a non-linear relationship, thus the government spending economic growth model is non-linear. It was found that if positive economic development is to be achieved, economic growth should preferably be kept within the −1.69 and 3.0 per cent band, and specifically above 1 per cent band.

The unique contribution of this study is that no previous study has attempted the non-linear government spending-economic growth nexus whether within the Keynesian or Wagner law for South Africa.

The purpose of this paper is to examine the relationship between government expenditure and economic growth in Botswana over the period 1985‒2016. The study employed the auto-regressive distributed lag (ARDL) bounds testing approach in investigating the nexus. The study makes the argument that the effectiveness of public spending should be assessed not only against the amount of the expenditure but also by the type of the expenditure. The empirical findings showed that aggregate expenditure has a negative short-run and positive long-run effect on economic growth. When expenditure is disaggregated, both forms of expenditures have a positive short-run effect on economic growth, whereas only a long-run positive impact of recurrent expenditure is observed. The study suggests the need to prioritize scarce resources in productive recurrent and development spending that enables increased productivity.

This study examined the effectiveness of government spending in Botswana, within an ARDL framework from 1985 to 2016. To achieve this, the analysis is carried out on both an aggregate and disaggregated level. Government spending is divided into recurrent and development expenditures.

This study examined the effectiveness of government spending in Botswana, within an ARDL framework from 1985 to 2016. To achieve this, the analysis hinged on both the aggregate and disaggregated levels. The results of the aggregate analysis suggest that total public expenditure has a negative impact on economic growth in the short run; however, its impact becomes positive over the long run. On disaggregating government spending, the results show that both recurrent and development expenditures have a significant positive short-run impact on growth; however, in the long run, the significant positive impact is only observed for recurrent expenditure.

The results provide evidence of the diverse effects of government expenditure in the country. In the period under investigation, 73 percent of total government expenditure in Botswana was recurrent in nature, whereas 23 percent was related to development. From the results, it can be observed that although the recurrent expenditure has contributed to increased growth and must be encouraged, it is also pertinent for the Botswana Government to endeavor to place more emphasis on productive development expenditure in order to enhance short- and long-term growth. Further, there is a need to strengthen the growth-enhancing structures and to prioritize the scarce economic resources toward productive spending and ensuring continued proper governance over such expenditures.

The study provides empirical evidence on the effectiveness of government spending in a small open, resource-reliant middle-income SSA economy and argues that the effectiveness of public spending must be assessed not only against the amount of the expenditure but also on the type or composition of the expenditure. The study contributes to the scant empirical literature on Botswana by employing the ARDL approach to cointegration technique in estimating the long- and short-run impact of government expenditure on economic growth between 1985 and 2016.

This paper aims to examine the relationships between disaggregated government fiscal policy variables; private capital investment and economic growth in Ghana, as well as the similarities and differences in the impact of these variables on private investment (PI) and economic growth.

Cointegration and an error‐correction models are used, with time series properties of the variables investigate using augmented Dickey‐Fuller test and cointegration of the variables tested using Engel‐Granger two step procedure.

The findings indicate that changes in government recurrent expenditure, current government capital expenditure and international trade taxes are significant for growth while changes in tax on domestic goods and services, tax on international trade and tax on income and property matter for private capital investment. The major difference between the impact of fiscal policy on PI and economic growth, however, lies in the direction of impact.

Based on the findings of this study, it is recommended that different policies be pursued in the promotion of PI and economic growth. Also, given the low correlation between PI and economic growth, it is recommended that the Ghanaian private sector be focused on and fully developed in order for it to perform its role as an engine of growth.

Growth has been shown to be influenced by government expenditure and international trade taxes while private capital investment is influenced by taxes on domestic goods and services, international trade and on income and property. Fiscal policy authorities will find these useful.

Most empirical studies on the government expenditure-economic growth nexus suggest a negative relationship between the size of the government expenditures and economic growth especially government consumption expenditures. Given these findings, the government should focus on development expenditures and reduce non-development expenditures for higher economic growth. However, the authors argue that this may not be the case, as government consumption expenditures along with better institutional quality promote growth via reduced corruption, reduction of political risks and good governance. The purpose of this study is to provide empirical evidences that both government consumption and development expenditure promote growth in the presence of better institutional quality.

This paper re-examines the impact of government expenditures on growth whilst controlling institutional factors for a sample of 30 developed and 91 developing countries from 1984 to 2017. Government expenditure is segregated into consumption and development expenditures.

The results are consistent with existing findings where government consumption expenditures have a negative effect on growth and government development expenditures contribute positively towards growth. However, when the authors conditioned government consumption expenditures with institutional variables, results suggest that in the presence of good institutions, both government consumption and development expenditures promote growth.

The findings in this paper suggest that in the presence of good institutions, government consumption expenditures will contribute positively towards growth. The results are relatively consistent for both developing and developed economies, which suggests the importance of institutional factors leading to a parallel movement towards long run growth path. In other words, long run economic growth is driven by a similar institutional environment.

Both developed and developing countries show similar reactions towards consumption and development expenditures. This indicates that despite the level of development, government expenditures do contribute positively towards growth especially in the presence of better-quality institutions.

This study is aimed at testing the validity of the BARS theory and determining the threshold level at which excessive government expenditure hampers growth. The data from 10 African emerging economies from 1988 to 2019 were used.

The methodology comprises several different stages. In the first stage, an Lagrange Multiplier (LM) type test was employed to find the appropriate transition variable among all the candidate variables to assess the linearity between government expenditure and economic growth and to find the sequence for selecting the order m of the transition function. The linearity test helped to identify the nature of the relationships between government expenditure and economic growth. In the second stage, the model evaluation was tested using the wild cluster bootstrap-Lagrange Multiplier (WCL-LM) test to assess appropriateness of the model. Thirdly, the Panel smooth transition regression (PSTR) model with one regime was estimated to test the validity of the BARS curve.

The results revealed evidence of nonlinear effects between government expenditure and economic growth, where the size of the government spending was found to be a 27.84% share of GDP, above which government expenditure caused growth to decline in African emerging economies. The findings combined into an inverted U-shape relationship, in line with the BARS theory.

This study proposes that policy-makers ought to formulate prudent fiscal policies that encourage expenditure, which would improve growth for selected countries as their current level of spending is below the threshold. This might be done through: (1) a suitable investment portfolio and (2) spending more on infrastructure.

The study examines whether the growth effect of government spending is contingent on the level of institutional environment prevalent in Economic Community of West African States (ECOWAS).

The study adopts the more refined and more appropriate dynamic threshold panel by Seo and Shin (2016) and made applicable be Seo et al. (2019). The technique models a nonlinear asymmetric dynamics and cross-sectional heterogeneity simultaneously in a dynamic threshold panel data framework.

The results show that there is a threshold effect in the government spending-growth relationship. Specifically, the authors found that the impact of government spending on economic growth is positive and statistically significant only above a certain threshold level of institutional development. Below that threshold, the effect of government spending on growth is insignificant and negative at best. The findings suggest that government spending-growth nexus is contingent on the level of Institutional quality.

Unlike previous studies that adopt the linear interaction model which pre-impose a priori conditional restrictions, this study adopts the dynamic threshold panel framework which allows the lagged dependent variable and endogenous covariates.

This paper investigates whether institutional environment influences the relationship government spending and economic growth in ECOWAS over the period 2008–2017.

The study adopts the recently developed panel vector autoregressive (PVAR) by Abrigo and Love (2015) and a two-step system generalised method of moment (GMM).

The results from the study show no evidence of either unidirectional or bidirectional causal relationship between government spending and economic growth in ECOWAS. Our findings reveal that government spending when associated with high level of corruption, oversized government and a waste of public resources will not cause economic growth.

Unlike previous studies, we resolve the inherent problems of endogeneity and persistence in economic data. Likewise, we depart from existing studies that examined the causal relationship in a bivariate framework and adopt a trivariate causality testing.