The impact of government spending on economic growth: The case of Armenia under the global gateway partnership

Karen Grigoryan and Taguhi Chapanyan

No 2025-5, Discourses in Social Market Economy from OrdnungsPolitisches Portal (OPO)

Abstract: This article examines the impact of government spending, as well as current and capital expenditures, on economic growth. Current and capital expenditures have distinct roles in shaping a countries' economic trajectory. For one hand, current expenditures are essential for maintaining short-term economic stability and supporting immediate needs and, while on the other hand, capital expenditures, contributes to long-term economic growth by enhancing productivity, improving efficiency, and fostering innovation. The article identifies the necessary balance between these spending categories to maximize both short-term economic stability and longterm growth potential. Furthermore, the article also discussed how Armenia's government spending can align with global initiatives such as the European Union's Global Gateway strategy, which aims to foster smart, clean, and secure connections in key sectors like digital, energy, and transport. This study uses the Vector Autoregression (VAR) and least squares (LSM) models to analyze the relationships of government revenues, public debt, total government expenditures, as well as current and capital expenditures, with economic growth. The model results indicate that increase of government revenues leads to increase of economic growth, and government expenditures. At the same time increase of economic growth contributes to an increase of government expenditures, while increase of public debt suppresses economic growth.

Keywords: government expenditure; economic growth; current expenditure; capital expenditure; global gateway; vector autoregressive model (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-gro and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:opodis:328269

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