Government Expenditure-GDP Nexus: Panel Causality Evidence

The aim of this paper is to analyze the causality relationship between government expenditure and economic growth for two panels of twenty Asian countries during 1970 to 2010 periods. The results of Panel cointegration support the existence of long-run relationship only for developing panel. Furthermore, the empirical finding of causality indicates bidirectional causality between government expenditure and economic growth in short-run for advanced and newly industrialized countries, and bidirectional causality in long-run for developing panel.