Government expenditure and growth in MIST countries: Testing the armey curve
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https://doi.org/10.70736/ijoess.1667Keywords:
Government expenditure, Economic growth, ARMEY curve, MIST countriesAbstract
The correlation between government expenditure and economic development has been a subject of considerable interest within academic research and policymaking forums. The present study undertakes an investigation into the quadratic impact of this relationship drawing insights from the ARMEY curve hypothesis. It focuses on the MIST countries (Mexico, Indonesia, South Korea, and Turkiye) during the period from 1960 to 2023. The employment of the Westerlund cointegration test reveals the existence of a long-term relationship, indicating that all variables are cointegrated. The Augmented Mean Group (AMG) estimator further demonstrates that South Korea validates the ARMEY curve, while Indonesia and Mexico exhibit a positive relationship amongst variables. It is also concluded that, Turkiye does not demonstrate a significant quadratic relationship. The study’s findings underscore the notion that government spending exerts distinct impacts on economic growth across different nations, thereby invalidating the widely held belief that the inverse-U shape relationship is universally applicable to the ARMEY curve. The results imply that government spending can have a positive effect on economic growth independent of reaching a threshold, thus challenging the conventional understanding of its impact on economic performance. This study underscores the need to consider country-specific factors when assessing the role of government spending in driving economic growth.
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