An examination of the relationship between government spending and economic growth in Namibia
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Date
2015
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Abstract
The existing studies on the relationship between government spending and economic growth provide inconclusive empirical evidence. This study examines the causal relationship between government spending and economic growth for the Namibian economy by employing general government (final) consumption expenditure and real Gross Domestic Product (GDP) data for the period 1980 to 2012. The study employs the pair wise Granger causality test, Co-integration test and Vector Error Correction Model (VECM). The series were tested for stationarity using the Augmented Dickey-Fuller (ADF) test. The study found that the variables were non-stationary but would become stationary after being differenced once. VECM and pair wise Granger causality tests results support the hypothesis of public expenditure causing economic growth as proposed by the Keynesian theory. The results show that there is a unidirectional relationship between the two variables. The empirical investigations suggest that government spending has a significant and positive impact on economic growth in Namibia.
Description
A thesis submitted in partial fulfilment of the requirements for the Master Degree of Business Administration (Finance)
Keywords
Government spending, Economic growth, Namibia