Testing Wagner's Law for The Gambia, 1977-2013

Jobarteh, Mustapha (2017): Testing Wagner's Law for The Gambia, 1977-2013.

Abstract

Wagner’s law relates the positive nexus between public spending and economic activity, where greater economic activity leads to increased public spending. This paper examines the validity of this hypothesis for The Gambia for the period 1977-2013. Using econometric techniques of ARDL bounds test, Johansen and Juselius (1990) multivariate cointegration test, Granger causality and Toda and Yamamota (1995) Granger non-causality tests, the findings show validity for Wagner’s law for The Gambia. Therefore, the government of the Gambia should channel it’s expenditures toward the productive sectors of economy so as to promote economic growth in the country.

• Item Type: MPRA Paper
• Language: English
• Keywords: Wagner’s law, Bounds test, The Gambia, Granger causality.
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H5 - National Government Expenditures and Related Policies > H50 - General

References

Afzal, M, & Abbas, Q. (2010). Wagner’s law in Pakistan : Another look, Journal of Economics and International Finance Vol. 2(1) pp. 012-019. Antonis, A. (2013). Wagner ’ s Law versus Keynesian Hypothesis : Evidence from pre-WWII Greece, Panoeconomicus, pp. 457-472 Babatunde, M. A. (2006). A bound testing analysis of Wagner’s law in Nigeria : 1970-2006, Applied Economics, Vol 43, Issue 21 Bojanic, A. N. (2013). Testing the Validity of Wagner’s Law in Bolivia: A Cointgeration and Causality Analysis with Disaggregated Data, Revista de Análisis Económico, Vol. 28, Nº 1, pp. 25-45 Cheung, Y.W., Lai, K.S. (1993). Finite-sample sizes of Johansen’s likelihood ratio tests for cointegration. Oxford Bulletin of Economics and Statistics 55, 313–329. Dickey, D. A. & Fuller, W. A. (1979). Distributions of the estimators for autoregressive time series with a unit root, Journal of the American Statistical Association. 74, 427-431 Durevall, D. and Henrekson, M. (2011). The futile quest for a grand explanation of long-run government expenditure, Journal of Public Economics, 95(7-8), 708–722 Engle, R. F. and Granger, C. W., 1987, Co-integration and error correction: representation, estimation and testing. Econometrica, 55 (2), 251–276. Goffman, J. J., (1968), “On the Empirical Testing of Wagner’s Law: a Technical Note.” Public Finance/ Finances Publiques, Vol. 3, No. 3, pp. 359–364 Gupta, S. P., (1967), “Public Expenditure and Economic Growth: a Time Series Analysis.” Public Finance/Finances Publiques, Vol. 22, No. 4, pp. 423–461. Halicioglu, F. (2003). Testing Wagner ’ s Law for Turkey, 1960 – 2000, Review of Middle East Economics and Finance, http://doi.org/10.1080/1475368032000139279 Henrekson, M. (1993). Wagner’s Law — A Spurious Relationship ? Public Finance, 48(3) Ibok, O. W. & Bassey, N. E., (2014). Wagner’s Law Revisted : The Case of Nigerian Agricultural Sector ( 1961 – 2012 ), International Journal of Food and Agricultural Economics, 2(3), 19–32. Jean-Garcia, M (2011). Empirical Analysis of Wagner’s Law for the Spain’s Regions, International Journal of Academic Research in Accounting, Finance and Management Science, Vol. 1 (1) Johansen, S., Juselius, K. (1990), Maximum Likelihood Estimation and Inference on Co-integration with Applications to the Demand for Money, Oxford Bulletin of Economics, Vol. 52, pp. 169-210 Karagianni, S., Pempetzoglou, M., & Strikou, S. (2002). Testing Wagner ‟ s Law For The European Union Economies Journal of Applied Business Research, 18(4), 107–114 Keho, Y. (2015). Revisiting Wagner’s Law for Selected African Countries : A Frequency Domain Causality Analysis, Journal of Statistical and Econometric Methods, 4(4), 55–69 Kumar, S., Webber, D., & Fargher, S. (2012). Wagner’s Law Revisited : Cointegration and Causality tests for New Zealand, Applied Economics 44 (5) pp- 607 - 616. Magazzino, C. (2012). Wagner’s Law and Augmented Wagner’s Law in EU-27 . A Time-Series Analysis on Stationarity, Cointegration and Causality, International Research Journal of Finance and Economics, Issue 89 Mann, A. J. (1980), “Wagner’s Law: an Econometric Test for Mexico, 1925–1976.” National Tax Journal, Vol. 33, No, 2, pp. 189-201. Menyah, K., Wolde-Rufael, Y. (2013) “Government expenditure and economic growth: the Ethiopian experience, 1950-2007”, Journal of Developing Areas, Vol.47, No.1, pp.263-280. Michas, N. A., 1975, Wagner’s law of public expenditures: what is appropriate measurement for a valid test. Public Finance/Finances Publiques, 30 (1), 77–84. Musgrave, R. A. (1969), Fiscal Systems. New Haven and London: Yale University Press. 300 Narayan, K. P , Ruseell, S and Nielsen, I (2006), Panel data, cointegration, causality and wagner's law: Empirical evidence from Chinese provinces, China Economic Review, DOI: 10.1016/j.chieco.2006.11.004 Pahlavani, M., Abed, D., & Pourshabi, F. (2011). Investigating the Keynesian View and Wagner ’ s L aw on the Size of Government and Economic Growth in Iran, International Journal of Business and Social Science 2(13), 170–175 Peacock, A. & Scott, A. (2000). The curious attraction of Wagner’s law, Public Choice 102, pp. 1-17 Peacock, A. T. and Wiseman, J., 1961, The Growth of Public Expenditure in the United Kingdom (Princeton: Princeton University Press) Perron, P. (1989), The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis, Econometrica, Vol. 57, No. 6, pp.1361-1401 Pesaran, M. H., Shin, Y., Smith, R. J. (2001), “Bounds Testing Approaches to the Analysis of Level Relationships.” Journal of Applied Econometrics, Vol. 16, No. 3, pp. 289-326. Verma, S, & Arora, R. (2010). Does the Indian Economy Support Wagner ’s Law ? An Econometric Analysis, EuroAsian Journal of Business and Economics, 3(5), 77–91