Original scientific paper
https://doi.org/10.1080/1331677X.2018.1515644
Governments spending and growth nexus with nonlinear adjustments: re-examining the Croatian and Slovenian case
Mile Bošnjak
orcid.org/0000-0002-7663-198X
; University of Zagreb, Faculty of Economics and Business, Department of International Economics, Trg J. F. Kennedyja 6, 10 000 Zagreb, Croatia
Abstract
The objective of this paper is to analyze the governments spending
- economic growth nexus and examine the asymmetries in
the adjustment process between the two in the Croatian and
Slovenian economy. The baseline relationship model between the
variables of interest is grounded on the assumption of Wagner’s
Law and Keynesian hypothesis. A possible nonlinear asymmetric
effect of governments spending and GDP toward their long-run
equilibrium is tested for each case. The test results indicate the
presence of nonlienarity in the relationship between public
spending and GDP in Croatia and Slovenia as well. Eventually,
country specific threshold cointegrating relationship between the
considered variables are estimated and tested. The results reveal
well suited threshold vector error correction model with significantly
different error correction adjustments in normal and stress
regimes for each of the two sample country
Keywords
Time series; Nonlinearity; Threshold Vector Error Correction; Governments spending; Economic growth
Hrčak ID:
221060
URI
Publication date:
3.12.2018.
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