REVISITING THE NEXUS BETWEEN PUBLIC EXPENDITURE AND ECONOMIC GROWTH IN SOUTH AFRICA

Abstract

Purpose: This study evaluates the nexus between public expenditure and economic growth in South Africa. The study uses time-series data to evaluate the nexus which span through 1986-2022 which is obtained from WDI, 2022. Method: Essentially, the study employed cointegration and VECM test. The cointegration test signifies that all the variables are cointegrated at long-run. The VECM shows a direct connection amid government expenditure and economic growth. Result: The study found a unidirectional causal association between public investment (HE, ML, ED, and INFR) and economic development, as well as a substantial long-run relationship between the variables. Thus, the study's empirical findings indicate that public spending is a major factor in economic expansion. Practical Implication for Economic Growth and Development: The study recommends the expansion of spending should be avoided for economic growth as it causes the economy to accumulate enormous amounts of debt. The direct influence of government expenditure on inflation makes it inappropriate to utilize it as a tool for stabilizing policy.

Keywords

• Public expenditure
• economic growth
• Granger causality
• VECM