Wagner’s hypothesis in Europe: a causality analysis with disaggregated data
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Wagner’s hypothesis in Europe: a causality analysis with disaggregated dataAuthor(s)
Date
2023-06-14Citation
Trofimov, I. D. (2023). Wagner’s hypothesis in Europe: a causality analysis with disaggregated data. European Journal of Government and Economics, 12(1), 5-38. https://doi.org/10.17979/ejge.2023.12.1.9146
Abstract
[Abstract] This paper examines Wagner hypothesis of the growth of public expenditure alongside the growth of economic activity for a panel of 28 European economies during the 1995-2018 period. The hypothesis is verified using Pesaran (2007) panel unit root and Westerlund (2007) cointegration tests that account for cross-sectional dependence in the series, and three panel causality tests (Toda-Yamamoto, Dumitrescu-Hurlin and Juodis-Karavias-Sarafidis) that are suitable for mixed order of series’ integration, heterogeneous balanced panels and cases of limited evidence of cointegration. The empirical results suggested that expenditure and output variables were non-stationary in levels and stationary in the first differences; the cointegration among the variables was present; the causality was principally uni-directional (from output to public expenditure), in line with Wagner’s hypothesis, or bi-directional; the causality from public expenditure to output along Keynesian lines was limited.
Keywords
Wagner’s hypothesis
Panel cointegration
Panel causality
Europe
Panel cointegration
Panel causality
Europe
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Attribution-NonCommercial 4.0 International
ISSN
2254- 7088