Examining the Validity of Wagner’s Law versus Keynesian Hypothesis: Evidence from Turkey’s Economy

Karahan, Özcan; Çolak, Olcay

doi:10.2478/saeb-2019-0008

Cited by 14 publications

(7 citation statements)

References 17 publications

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“…However, different results and ambiguous conclusions have been reported, even for the industrial sector. This has, therefore, led to further debate (Thanh, & Nguyen, 2019) with one of the most controversial literature problems being the direction of the causal relationship between public expenditure and economic growth (Karahan & Colak, 2019). According to Kuncoro (2014), not all government expenditures are productive and this statement strengthens this paper's urgency to contribute both theoretically and empirically to this discourse.…”

Section: Introductionmentioning

confidence: 59%

The Role of Government Expenditure and Investment for MSME Growth: Empirical Study in Indonesia

Prasetyo¹

2020

JAFEB

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In Indonesia, micro-, small-and medium-sized enterprises (MSMEs) are introduced to increase income by providing many easier jobs to improve economic growth. They have also been reported to be generally supportive of the local industry. The government policies on investment and expenditure have the ability to promote MSMEs and economic growth. Therefore, this research was conducted to analyze the theoretical background and empirical study to investigate government's role to promote MSMEs growth in Indonesia. The secondary data after the 2008 global financial crisis recorded quarterly from 2009 to 2019 Q3 were analyzed using the Ordinary Least Square (OLS) regression model. The results showed government expenditure has a positive and significant contribution to small-and medium-sized enterprises, but the effect was not significant for micro-businesses. Meanwhile, the investment sector was discovered to have a positive and significant effect on MSMEs. The policy implications of the Indonesian government are expected to focus on its expenditure's role as the most important factor for "social-economic protection of the community" through micro-enterprises, which are numerous and more attached to the real community economic-social life. Therefore, the existence of micro-businesses is very helpful for the lower classes despite their high vulnerability to crisis.

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Section: Introductionmentioning

confidence: 59%

The Role of Government Expenditure and Investment for MSME Growth: Empirical Study in Indonesia

Prasetyo¹

2020

JAFEB

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“…Recent findings have supported Keynes' theory of a positive relationship between government expenditure and economic growth (Karahan and Çolak, 2019;Ogar et al, 2019). And seeing as military spending is a part of government expenditure, the direct effect on income through the multiplier also extends to Benoit's findings on the positive and significant relationship between military spending and economic growth.…”

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confidence: 75%

The Impact of Military Spending on Economic Wellbeing in Nigeria

Akume

Jelilov

Akanegbu

2019

International Journal of Business, Economics and Management

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The impact of military spending on domestic output is contentious and therefore requires further analysis on a country by country basis to determine its level of significance. Nigeria's military contributions to the Economic Community of West African States (ECOWAS) sub-region and the recent rise of various insurgencies, particularly, Jamāʿat Ahl al-Sunna lil-Daʿawah wa al-Jihād' (Boko Haram)-arguably the most fatal insurgent group-has increased Nigeria's military expenditure. This study investigates the impact of this increase in military spending on the economic well-being (measured by GDP per capita) of Nigerians using the Autoregressive Distributed Lag (ARDL) bounds testing approach to co-integration for the period from 1988 to 2017. The results suggest that there is a positive relationship between military spending and economic well-being in Nigeria. However, the impact on citizens' wellbeing is not instantaneous as the variable is only significant after the current year spending; which does not last longer than a year. The study therefore recommends that defense spending be strategic, and that all earmarked funds for defense be deployed appropriately so that increases in wellbeing can be more long-term as opposed to lasting for only one year. Contribution/Originality: This study contributes to existing literature on military spending and growth. This study uses an adapted model.

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“…The Keynesian theory proposes the expansion of GE through expansionary fiscal policies to enhance economic activity. As claimed by Keynes's theory, when aggregate demand is the driver of economic growth, it should be promoted through GE to foster economic growth [5].…”

Section: Literature Reviewmentioning

confidence: 99%

The Causal Nexus between Government Expenditure and Economic Growth: Wagner versus Keynes Hypothesis

Sek,

Yi Sim,

Keat Chea

et al. 2022

MATEMATIKA

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The causality between economic growth and government expenditure has long been a topic of interest among economists. Theoretically, Wagner’s law claimed that economic growth (EG) contributes to government expenditure (GE), while the opposite causal nexus was claimed by Keynes. This study seeks to test the validity of these two theories by examining four versions of functional hypotheses and their reverse functions: Gupta, Peacock and Wiseman, Musgrave, and Mann. The main objectives include examining the nexus by comparing the developed versus developing countries, short-run versus long-run estimates, and the results between three estimators. The panel data regression applies the three estimators, which include pooled mean group (PMG), mean group (MG), and dynamic fixed effect (DFE). The datasets are collected from 1970 to 2018. The results detect both long-run and short-run relationships in the Gupta version and the Peacock and Wiseman version of Wagner’s law, and also the reverse Gupta version and the reverse Peacock and Wiseman version of Keynes’ theory. To sum up, the two-way relationship between GE and EG exists in developing countries. On the other hand,Wagner’s law and Keynes’ theory are not valid in developed countries. The results imply that economic level matters, which leads to different linkages between EG-GE across groups of countries. Since the nexus exists in developing countries, policymakers should adopt fiscal policies to stimulate economic growth. With no GE and EG relationship found in developed countries, policymakers should focus on other economic indicators other than government expenditure to foster economic growth.

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Examining the Validity of Wagner’s Law versus Keynesian Hypothesis: Evidence from Turkey’s Economy

Cited by 14 publications

References 17 publications

The Role of Government Expenditure and Investment for MSME Growth: Empirical Study in Indonesia

The Role of Government Expenditure and Investment for MSME Growth: Empirical Study in Indonesia

The Impact of Military Spending on Economic Wellbeing in Nigeria

The Causal Nexus between Government Expenditure and Economic Growth: Wagner versus Keynes Hypothesis

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