In this research study, the main goal is to
determine whether government expenditure has impact on economic growth in the
SAARC countries. Therefore, the primary goal is to determine whether government
expenditure leads to economic development in SAARC countries and vice versa and
whether a long-run equilibrium is a significant relationship between the two
variables. The study relied solely on secondary data for its findings. Using
quantitative techniques such as regression, co-integration and granger
causality in the perspective of panel data from SAARC countries including
Bangladesh, India, Pakistan, Sri Lanka, and Bhutan from 2011 to 2020, the
authors developed their findings in the context of the SAARC countries. To
conduct the regression analysis, the Eviews software was employed. The
random-effects panel OLS model was used to generate the results. First and
foremost, Government spending has a strong positive impact on GDP in SAARC
countries, according to the empirical data. Second, in SAARC countries,
government expenditure and economic growth has a long lasting relationship. In
SAARC countries, there is unidirectional causality between GDP and government
expenditure in the region. As a result, the study has been validated in that it
is consistent with the Keynesian theory as well as Wagner’s Law. Research on
government expenditure and how it impacts on a country’s GDP has immense value on general public so that they get the idea of
how government expenses are utilized.
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