Public Expenditure and Economic Growth in India: An Empirical Analysis Using Vector Autoregression (VAR) Model

Rashmi Gupta ()
Additional contact information
Rashmi Gupta: Department Of Higher Education, Government of Gujarat, Ahmedabad, Gujarat India Author-2-Name: Swati Shastri Author-2-Workplace-Name: Associate Professor, Department Of Economics, Banasthali University, Dist.-Tonk, Rajasthan India Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:

GATR Journals from Global Academy of Training and Research (GATR) Enterprise

Abstract: Objective - The objective of this study is to test direction of causality between components of public expenditure and economic growth in India. Methodology/Technique - The paper uses annual data for the period 1980-2015. To measure public expenditure, plan expenditure and non-plan expenditure are used. The econometric methodology employed is Vector Auto regression (VAR) model. Findings - First, the stationary properties of the data were tested using Augmented Dickey-Fuller (ADF) test, Dickey-Fuller (DF) test, and the Phillip-Perron (PP) test and found that variables were non-stationary in level, but stationary in first differences. Then, Johansen- Jueslius cointegration test was employed to test the long-run association among the variables and results suggest an absence of any long-run association between plan expenditure and non-plan expenditure and economic growth in India. The Granger Causality test suggests there is unidirectional causality running from economic growth and non-plan expenditure and plan expenditure and non-plan expenditure and absence of causality public expenditure and economic growth. Novelty - The results of the Forecast Error Variance Decompositions test indicated that innovations in the variables are mostly explained by their own shocks. The impulse responses of the economic growth, plan expenditure and non-plan expenditure with respect to identified shocks are consistent with the results of Variance Decomposition Analysis. Type of Paper - Empirical.

Keywords: Plan Expenditure; Non-plan Expenditure; Economic Growth; Unit Root; Cointegration Test; Granger Causality Test; Forecast Error Variance Decomposition; Impulse Responses (search for similar items in EconPapers)
JEL-codes: O4 O49 O53 (search for similar items in EconPapers)
Pages: 14
Date: 2020-09-30
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published inJournal of Business and Economics Review, Volume 5, Issue 2

Downloads: (external link)
http://gatrenterprise.com/GATRJournals/JBER/pdf_fi ... i%20Gupta-Edited.pdf (application/pdf)
http://gatrenterprise.com/GATRJournals/online_submission.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:gtr:gatrjs:jber189

Access Statistics for this paper

More papers in GATR Journals from Global Academy of Training and Research (GATR) Enterprise
Bibliographic data for series maintained by Prof. Dr. Abd Rahim Mohamad ().