engleski

Is there Evidence of Wagner's Law in Croatia

The relationship between national output and government spending is one of the most debated topics between economists and policy makers during the last decades. The objective of this paper is to examine Wagner’s Law validity in Croatia, using yearly time series data between 1990 and 2012. To estimate the long-run relationship between government expenditures and output we applied a VEC (vector error correction) model, i.e. the concept of cointegration. Empirical results indicate the existence of a stable and positive long-run relationship between government expenditures and output in Croatia. However, being the elasticity less than one brings into question the existence of Wagner’s Law, i.e. it can be concluded that Wagner’s Law does not hold in the Croatian case. Despite this conclusion, the analysis is further continued by investigating the relationship between output and public expenditure in the short-run through conditional model, i.e. dynamic short-run model. Obtained results indicate that the changes in output have a statistically significant and positive impact on the public expenditure in the short-run.

Public expenditures, GDP, Wagner's Law, Croatia, VECM

nije evidentirano