Volume 3 • Issue 1 | March 2019
The Effects of Public Expenditure on Economic Growth in Asia Countries: A Bayesian Model Averaging Approach
Nguyen Ngoc Thach, Le Hoang Anh, Pham Thi Ha An
Abstract:
The impact of public expenditure on economic growth is a topic that has been of great interest to many researchers, e.g., [1], [10], [14], [23], [33]. However, the studies on this impact illustrate that the results are inconsistent. Besides, certain explanatory variables which should be included in the model were not specifed. This ambiguity affects the reliability of the results. Using Bayesian Model Averaging (BMA) method with the data obtained from 43 Asian countries in the period 2004-2016, we estimate the impact of public expenditure on economic growth with a large number of explanatory variables included in the model. The research results show that public expenditure has a negative impact on the economic growth in Asian countries. On the other hand, the components of public expenditure have a weak impact on economic growth. The empirical results confirm that since the majority of Asian countries are developing countries with a large proportion of state-owned sectors and low governance quality, large scale of public expenditure does not have positive effects on the economic growth. Based on the research results, this study provides policy implications to improve governance quality and effciency of public expenditures in Asian countries.
JEL classification: C11, E02, E62, H50