Further Evidence on the Causal Relationship between Government Spending and Economic Growth: The Case of Greece, 1958-2004

Acta Oeconomica, Vol. 59 (1), p. 57-78, 2009

Posted: 6 Jan 2013

See all articles by Constantinos Katrakilidis

Constantinos Katrakilidis

Aristotle University of Thessaloniki - Department of Economics

Persefoni Tsaliki

Aristotle University of Thessaloniki

Date Written: 2009

Abstract

The purpose of this paper is the empirical testing of the relationship between economic growth and government spending and, at the same time, to determine the extent to which economic growth causes growth in government expenditures (Wagner’s law) or the other way around (Keynesian hypothesis). The econometric analysis, using data for the Greek economy covering the period 1958–2004 and based on recent developments in the theory of cointegrated processes, reveals a long-run equilibrium relationship between government expenditures and economic output. Furthermore, the analysis detects causal effects in both the short-run and long-run horizon running from government expenditures to the level of economic activity and vice versa.

Keywords: Wagner’s Law, Economic Growth, Cointegration, ARDL, Greece

JEL Classification: H50, H89, C12, C22, E6, O40

Suggested Citation

Katrakilidis, Constantinos and Tsaliki, Persefoni, Further Evidence on the Causal Relationship between Government Spending and Economic Growth: The Case of Greece, 1958-2004 (2009). Acta Oeconomica, Vol. 59 (1), p. 57-78, 2009, Available at SSRN: https://ssrn.com/abstract=2196888

Constantinos Katrakilidis (Contact Author)

Aristotle University of Thessaloniki - Department of Economics ( email )

Thessaloniki, 54124
Greece

HOME PAGE: http://users.auth.gr/katrak

Persefoni Tsaliki

Aristotle University of Thessaloniki ( email )

Thessaloniki
Greece

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