| Peer-Reviewed

An Error Correction Model on the Impact of Government Expenditure on Economic Growth in Liberia from 1970 to 2020: Keynesian Economics Visited

Received: 21 December 2020     Accepted: 4 January 2021     Published: 12 January 2021
Views:       Downloads:
Abstract

Liberia is currently experiencing one of its worse economic decline in over a decade. Various explanations are attributable to this decline. The 2014 Ebola Virus disease, the withdrawal of the multinational peace keeping force and the reduction in its primary exports, rubber, timber, etc can all be cited as causes of such decline. To further inflame the anguish of the economy, the 2019 corona virus disease dampened the hopes for further economic repairs. The decline in the global economies weakens the demand for Liberia’s primary exports, iron ore and rubber. Given all these shocks, this research investigated the effect of government expenditure on economic growth in Liberia over the last 50 years. The research used vector error correction model to test for long run relationship between the two variables and found that there is a slightly strong long run relationship between government expenditure and growth, but did not find any short run relationship between government spending and growth. This implies that any non- performance of the budget which is the vehicle used to ferry government activities will have an adverse short run implication on the macroeconomy of Liberia. The research used data on government expenditure obtained from the Ministry of Finance and Development planning in Liberia, the World Bank database for economic growth.

Published in International Journal of Business and Economics Research (Volume 10, Issue 1)
DOI 10.11648/j.ijber.20211001.13
Page(s) 21-26
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2021. Published by Science Publishing Group

Keywords

Vector Error Correction Model, Government Expenditure, Economic Growth, Johanssen Cointegration Test

References
[1] Attari, M. I. J., Javed, A. Y. (2013). Inflation, Economic Growth and Government Expenditure of Pakistan: 1980–2010. Procedia Economics and Finance, 5, 58–67. DOI: 1016/S2212- 5671(13)00010-5.
[2] Barro, R. J. (1989). Economic growth in a cross section of countries. NBER Working Paper, 3120. DOI: 10.1017/CBO9781107415324.004.
[3] Chan, N. H. (2010) Time Series Applications to Finance with R and S-Plus. Hoboken, NJ: John Wiley & Sons, Inc.
[4] Hasnul, A. G. (2015). The effects of government expenditure on economic growth: the case of Malaysia. MPRA Paper. Retrieved from: https://mpra.ub.uni-muenchen.de/71254 (25.10.2018).
[5] Herranz, E. (2017) Computational Statistics: Wiley Interdisciplinary Reviews: DOI: 0.1002/wics.1396.
[6] Horton, M. and Germainy, A. (2009) Back to Basics: what is fiscal policy? Access from: http://www.imf.org/external/pubs/ft/fandd/2015/06/basics.htm
[7] Kimaro, E. L., Keong, C. C., Sea, L. L. (2017). Government Expenditure, Efficiency and Economic Growth: A Panel Analysis of Sub-Saharan African Low Income Countries. African Journal of Economic Review, V (II), 34–54.
[8] Lowenberg, A. D. (1990). Neoclassical economics as a theory of politics and institutions. Cato Journal, 9 (3), 619–639
[9] Nyasha, S. & Odhiambo, N. (2019) The impact of public expenditure on economic growth: A review of international Literature, Folia Oeconomica Stetinensia Volume 19 (2019) Issue 2 DOI: 10.2478/foli-2019-0015
[10] Romer, P. M. (1986). Increasing returns and long-run growth. Journal of Political Economy, 94 (5), 1002–1037. DOI: 10.1086/261420.
[11] Sáez, M. P., Álvarez-García, S., Rodríguez, D. C. (2017). Governmen expenditure and economic growth in the European Union countries: New evidence. Bulletin of Geography. Socioeconomic Series, 36, 127–133. DOI: 10.1515/bog-2017-0020.
[12] Tcherneva, P. R. (2011) Fiscal policy effectiveness: Lessons from the Great Recession. Levy Economics Institute of Bard College. Working paper, 649.
[13] Yasin, M. (2000). Public Spending and Economic Growth: Empirical Investigation of SubSaharan Africa. Southwestern Economic Review, 59–68.
[14] Echekoba, F. N. and Amakor, I. C. (2017) THE IMPACT OF GOVERNMENT EXPENDITURE ON NIGERIA ECONOMIC GROWTH: A FURTHER DISAGGREGATED APPROACH. NG - Journal of Social Development. Vol 6 (3).
[15] Barro, R. (1990): "Government Spending in a Simple Model of Endogenous Growth". Journal of Political Economy, Vol. 98, S103-S107.
Cite This Article
  • APA Style

    Lester Zomatic Tenny. (2021). An Error Correction Model on the Impact of Government Expenditure on Economic Growth in Liberia from 1970 to 2020: Keynesian Economics Visited. International Journal of Business and Economics Research, 10(1), 21-26. https://doi.org/10.11648/j.ijber.20211001.13

    Copy | Download

    ACS Style

    Lester Zomatic Tenny. An Error Correction Model on the Impact of Government Expenditure on Economic Growth in Liberia from 1970 to 2020: Keynesian Economics Visited. Int. J. Bus. Econ. Res. 2021, 10(1), 21-26. doi: 10.11648/j.ijber.20211001.13

    Copy | Download

    AMA Style

    Lester Zomatic Tenny. An Error Correction Model on the Impact of Government Expenditure on Economic Growth in Liberia from 1970 to 2020: Keynesian Economics Visited. Int J Bus Econ Res. 2021;10(1):21-26. doi: 10.11648/j.ijber.20211001.13

    Copy | Download

  • @article{10.11648/j.ijber.20211001.13,
      author = {Lester Zomatic Tenny},
      title = {An Error Correction Model on the Impact of Government Expenditure on Economic Growth in Liberia from 1970 to 2020: Keynesian Economics Visited},
      journal = {International Journal of Business and Economics Research},
      volume = {10},
      number = {1},
      pages = {21-26},
      doi = {10.11648/j.ijber.20211001.13},
      url = {https://doi.org/10.11648/j.ijber.20211001.13},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20211001.13},
      abstract = {Liberia is currently experiencing one of its worse economic decline in over a decade. Various explanations are attributable to this decline. The 2014 Ebola Virus disease, the withdrawal of the multinational peace keeping force and the reduction in its primary exports, rubber, timber, etc can all be cited as causes of such decline. To further inflame the anguish of the economy, the 2019 corona virus disease dampened the hopes for further economic repairs. The decline in the global economies weakens the demand for Liberia’s primary exports, iron ore and rubber. Given all these shocks, this research investigated the effect of government expenditure on economic growth in Liberia over the last 50 years. The research used vector error correction model to test for long run relationship between the two variables and found that there is a slightly strong long run relationship between government expenditure and growth, but did not find any short run relationship between government spending and growth. This implies that any non- performance of the budget which is the vehicle used to ferry government activities will have an adverse short run implication on the macroeconomy of Liberia. The research used data on government expenditure obtained from the Ministry of Finance and Development planning in Liberia, the World Bank database for economic growth.},
     year = {2021}
    }
    

    Copy | Download

  • TY  - JOUR
    T1  - An Error Correction Model on the Impact of Government Expenditure on Economic Growth in Liberia from 1970 to 2020: Keynesian Economics Visited
    AU  - Lester Zomatic Tenny
    Y1  - 2021/01/12
    PY  - 2021
    N1  - https://doi.org/10.11648/j.ijber.20211001.13
    DO  - 10.11648/j.ijber.20211001.13
    T2  - International Journal of Business and Economics Research
    JF  - International Journal of Business and Economics Research
    JO  - International Journal of Business and Economics Research
    SP  - 21
    EP  - 26
    PB  - Science Publishing Group
    SN  - 2328-756X
    UR  - https://doi.org/10.11648/j.ijber.20211001.13
    AB  - Liberia is currently experiencing one of its worse economic decline in over a decade. Various explanations are attributable to this decline. The 2014 Ebola Virus disease, the withdrawal of the multinational peace keeping force and the reduction in its primary exports, rubber, timber, etc can all be cited as causes of such decline. To further inflame the anguish of the economy, the 2019 corona virus disease dampened the hopes for further economic repairs. The decline in the global economies weakens the demand for Liberia’s primary exports, iron ore and rubber. Given all these shocks, this research investigated the effect of government expenditure on economic growth in Liberia over the last 50 years. The research used vector error correction model to test for long run relationship between the two variables and found that there is a slightly strong long run relationship between government expenditure and growth, but did not find any short run relationship between government spending and growth. This implies that any non- performance of the budget which is the vehicle used to ferry government activities will have an adverse short run implication on the macroeconomy of Liberia. The research used data on government expenditure obtained from the Ministry of Finance and Development planning in Liberia, the World Bank database for economic growth.
    VL  - 10
    IS  - 1
    ER  - 

    Copy | Download

Author Information
  • Graduate School of Business, University of Liberia, Monrovia, Liberia

  • Sections