Wagner’s Law vs. Keynesian Hypothesis: Dynamic Impacts

Ciro Bazán Navarro, Víctor Álvarez-Quiroz () and Yennyfer Morales Olivares ()

Sustainability, 2022, vol. 14, issue 16, 1-25

Abstract: This study analyzes the dynamics between public expenditure and economic growth in Peru for 1980Q1–2021Q4. We used quarterly time series of real GDP, public consumption expenditure, public expenditure, and the share of public expenditure to output. The variables were transformed into natural logarithms, wherein only the logarithm of public expenditure to output ratio is stationary and the others are non-stationary I 1 . The study of stationary time series assesses whether Wagner’s law, the Keynesian hypothesis, the feedback hypothesis, or the neutrality hypothesis is valid for the Peruvian case according to Granger causality. We found cointegration between real GDP and public expenditure, and public consumption expenditure and real GDP. Estimating error correction and autoregressive distributed lag models, we concluded that Wagner’s law and the Keynesian hypothesis are valid in the Peruvian case, expressed as dynamic processes that allow us to obtain short-run and long-run impacts, permitting the mutual sustainability of economic growth and public expenditure.

Keywords: public expenditure; economic growth; Wagner’s law; Keynesian hypothesis; Granger causality; cointegration; error correction model; autoregressive distributed lag model (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/14/16/10431/pdf (application/pdf)
https://www.mdpi.com/2071-1050/14/16/10431/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:14:y:2022:i:16:p:10431-:d:894595

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().