EconPapers    
Economics at your fingertips  
 

Public spending and Wagner’s law in Central and Eastern European Countries

Irena Szarowska

MPRA Paper from University Library of Munich, Germany

Abstract: This paper provides direct empirical evidence on cyclicality and the long-term and short-term relationship between government spending and output in eight Central and Eastern European countries in a period 1995–2009. We analyzed annual data on government spending in compliance with the COFOG international standard. Although the theory implies that government spending is countercyclical, our research does not prove that. The results confirm cyclical development of government spending on GDP, Wagner´s law and voracity effect in the CEE countries during 1995–2009. We used Johansen cointegration test and the error correction model. Output and government spending are cointegrated for at least 4 from 10 spending functions in every country and it implies a long-term relationship between government spending and output. The government spending functions are procyclical in most CEE countries (93% cases in the sample). Average value of long-run elasticity coefficient is 1.74 for all spending functions, 1.02 for total government spending. We also analyzed the short-run relationship between spending and output. The coefficient values (average is 2.89) confirm the voracity hypothesis, as they suggest that in response to a given shock to real GDP, government spending rises by even more in percentage points.

Keywords: Government spending; cyclicality; voracity effect; long-run elasticity; short-run elasticity; cointegration; error correction term (search for similar items in EconPapers)
JEL-codes: C3 E62 H5 O11 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published in Acta Universitatis Agriculturae et Silviculturae Mendeleianae Brunensis 2.60(2012): pp. 383-390

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/59779/1/MPRA_paper_59779.pdf original version (application/pdf)

Related works:
Journal Article: Public spending and Wagner's law in Central and Eastern European countries (2012) Downloads
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:pra:mprapa:59779

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

 
Page updated 2025-03-24
Handle: RePEc:pra:mprapa:59779