Government expenditure and economic growth in Malaysia

This paper studies the relationship between GDP and government expenditure in Malaysia using Penn World Table annual data for 1950-92. Two types of analyses are performed. First, we study the long run relationship between GDP and government expenditure in their various forms. We find the existence of long run relationship between GDP and government expenditure. Second, we perform augmented Granger causality tests between the growth rates of two sets of the variables. Here, we do not find any evidence that the growth of government expenditure contributes to the growth of GDP. There is no evidence of any reverse causality either