Government Expenditure and Economic Growth in ASEAN-5 Economies: an Autoregressive Distributed Lag (ARDL) Approach

Abstract

In this paper, we examine the relationship between components of government expenditure and economic growth in ASEAN-5 using the autoregressive distributed lag (ARDL) approach developed by Pesaran, Shin, and Smith. Bound testing approaches to analysis of level relationship, and this test suggested that the all variables in functional form framework are bound together in long run. The results also show that there are possible long-run coefficient effects between the variables. Breaking down the components of government expenditure, we found that health expenditure (he), information and communication technology expenditure (ice), education expenditure (ee), and housing and community facilities expenditure (hce) have a positive effect on economic growth among the ASEAN5 countries. The military expenditure (me) has a negative significant effect on economic growth in Indonesia and the Philippines. These results support those of other studies that indicate that in the long-run coefficients of the variables are an important determinant of the real GDP.