Threshold Impacts of Public Expenditure on Economic Growth: Insights from India Utilizing Panel Threshold Regression Model

Neelam Sharma (), Sakshi Khanna and Amit Srivastava
Additional contact information
Neelam Sharma: Jaypee University of Information Technology, India, Postal: Waknaghat, Himachal Pradesh 173234, India.
Sakshi Khanna: University College of Business Studies, Himachal Pradesh University, India
Amit Srivastava: Jaypee University of Information Technology, India

Asian Journal of Applied Economics/ Applied Economics Journal, 2024, vol. 31, issue 1, 37-57

Abstract: This research examines the impact of public expenditure dynamics on economic growth in India and its six distinct regions (North-Eastern, Northern, Western, Southern, Eastern, and Central) using Hansen's panel threshold regression model. Spanning from 1999–2000 to 2018–19, the analysis reveals significant inter-regional variations in the relationship between public expenditure and economic growth. The Northern, Western, and North-Eastern regions exhibit a singular threshold impact, indicating that exceeding this threshold level may not positively influence economic growth and could lead to fiscal imbalances. In contrast, the Central, Eastern, and Southern regions illustrate no threshold effect. Furthermore, the study identifies that the optimal expenditure threshold is higher for the North-eastern region (81.9%) compared to the Northern (60.5%) and Western regions (50.7%), reflecting higher expenditure requirements. Conversely, when considering India as a whole, no threshold effect is observed, indicating a consistent impact across all regions. The findings underscore the importance of policymakers' attention to optimal expenditure, crucial for addressing long-term budgetary imbalances and fostering inclusive growth.

Keywords: public expenditure; threshold regression model; economic growth; fiscal policy; fiscal imbalances (search for similar items in EconPapers)
JEL-codes: C24 H50 O23 O40 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://so01.tci-thaijo.org/index.php/AEJ/article/view/271650/176728 Full text (application/pdf)
Asian Journal of Applied Economics/ Applied Economics Journal

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:ris:apecjn:0093

Access Statistics for this article

Asian Journal of Applied Economics/ Applied Economics Journal is currently edited by Waleerat Suphannachart

More articles in Asian Journal of Applied Economics/ Applied Economics Journal from Kasetsart University, Faculty of Economics, Center for Applied Economic Research Center for Applied Economics Research, Faculty of Economics, Kasetsart University, Bangkok, 10900, Thailand. Contact information at EDIRC.
Bibliographic data for series maintained by Arannee Tongjankaew ().