The Impact of Public Expenditure Components on Economic Growth in Ethiopia; Vector Autoregressive Approach
International Journal of Business and Economics Research
Volume 8, Issue 4, August 2019, Pages: 211-219
Received: Jun. 12, 2019; Accepted: Jul. 10, 2019; Published: Jul. 26, 2019
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Endaylalu Solomon, Department of Economics, Jinka University, Jinka, Ethiopia
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The study analyzes the impact of public expenditure components on economic growth in the Ethiopian economy using annual time series data for the period 1982-2016. The study uses public expenditure variables from economic infrastructures (agriculture, road and energy), social infrastructure (education) and recurrent and capital expenditure components. With the help of co-integration and vector error correction analysis, the impact of various areas of public expenditures was assessed in the long-run as well as in the short-run. The study found that public expenditure components at all have a significant positive effect on economic growth in the long-run but they have insignificant impact in the short-run except education and road. Expenditure on education and road has both short-run and long run effects on economic growth. The impact of educational expenditure on economic growth is highly significant and positive which have powerful role in promoting the country’s economic growth compared to other variables. In the short run the impact of education on economic growth is negative and significant whereas that of road expenditure is significant and positive. Based on the results of the co-integrated and vector error correction model, this study found that, it is better and advisable to have an excessive expenditure on education and road construction than other areas of public expenditure, so as to accelerate economic growth in Ethiopia.
Economic Growth, Economic Infrastructure, Public Expenditure, Social Infrastructure
To cite this article
Endaylalu Solomon, The Impact of Public Expenditure Components on Economic Growth in Ethiopia; Vector Autoregressive Approach, International Journal of Business and Economics Research. Vol. 8, No. 4, 2019, pp. 211-219. doi: 10.11648/j.ijber.20190804.16
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This article is an open access article distributed under the Creative Commons Attribution License ( which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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