The Impact Of The Government Expenditure And Government Revenue On The Economic Growth:Evidence From Laos

This thesis investigates the effect of government revenue(tax)and government expenditure(spending)on economic growth.In particular,the thesis employs an annual time-series database for a period of 1981-2015 for Laos.The researcher investigates whether there is long-run association and long-run causality between gross domestic product,government revenue,government expenditure,consumer price index and deposit money market interest rate using time-series analysis.Firstly,the researcher found stationarity for all the variables after first-order condition.Hence,the proceeding time-series analysis can be applied.Secondly,the researcher tested the existence of cointegration among the macro variables.The both of eigenvalue statistics from the Johansen cointegration test sugguests that there are two cointegrations among the variables.This implies there are associations running between the variables.Thirdly,the researcher also conducted the test of granger causality.Based from the results,the paper finds government expenditure causes government revenue,and government revenue also causes government expenditure at 1%significance level.Meanwhile,we found that the joint alternative hypothesis that the variables cause GDP is significant at 1%level.Lastly,the researcher estimated a Vector error correction model,found a strong evidence for long-run causality running from the independents variable to GDP,which is significant at 1%level.For post-estimations,the researcher used Larange Multiplier test to test whether there is autocorrelation for the residual series of the whole model.The result indicates that there is no autocorrelation for residual series of lag 1 to lag 3 of the whole model.