Long- and short-run relationship between government spending and economic growth of Pakistan

Khurram Shehzad and Hafiz Adnan Munir

Abstract

The tenacity to do this work is to discover the long term and short-run relationship between government spending (defence spending and development expenditure) and economic growth. To this end, we use the Auto-Regressive Distributed Lag (ARDL) model on sample time-series over 1980-2015. The findings show that positive and significant relation prevails concerning long-term and short-term relationship between the Pakistan government's defence spending and economic growth. Further, outcomes illuminate that there is also a positive and significant relationship that prevails between the development spending by the government and the economic growth in both the long term and the short run. 
Keywords: Defence spending, ARDL, economic growth, development spending.