TESTING THE KEYNESIAN APPROACH AND WAGNER'S LAW FOR AFRICAN COUNTRIES ECONOMIES

Abstract

Author(s): Rabia DOGAN, Hayriye Atik

The relationship between public expenditures and economic growth has long been questioned and much debated. Within the framework of Keynesian Approach and Wagner's Law, Autoregressive Distributed Lag Model (ARDL) and Toda-Yamamoto Causality Test were applied for South Africa, Senegal and Burundi countries that vary in per capita income level and location. In the econometric analysis, data from 1980-2019 for South Africa, 1972-2019 for Senegal and 1976-2019 for Burundi were used. Among the selected countries, South Africa ranks first in terms of per capita income, followed by Senegal and Burundi. The validity of Wagner's Law for South Africa, both the Keynesian Approach and Wagner's Law for Senegal, and Wagner's Law for Burundi were supported. Although Wagner's Law is valid in all of them, the degree of long-term cointegration relationship has changed according to the development level of the countries. In the long run, a 1% change in per capita income increases public expenditures by 0.53% in South Africa, 1.19% in Senegal and 1.55% in Burundi. These results prove to us that economic growth will cause more public expenditures in less developed countries compared to other countries. In other words, economic growth in Burundi causes more public expenditures to increase compared to Senegal and South Africa.

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