Open AccessThe Effect of Federal Government Size on Long-Term Economic Growth in the United States, 1791-2009
Author(s) -
Federico Guerrero,
Elliott Parker
Publication year - 2012
Publication title -
modern economy
Language(s) - English
Resource type - Journals
eISSN - 2152-7245
pISSN - 2152-7261
DOI - 10.4236/me.2012.38120
Subject(s) - cointegration , economics , granger causality , government (linguistics) , context (archaeology) , causality (physics) , error correction model , econometrics , government spending , assertion , macroeconomics , term (time) , real gross domestic product , government expenditure , time series , monetary economics , public finance , statistics , mathematics , geography , market economy , linguistics , philosophy , computer science , welfare , archaeology , physics , quantum mechanics , programming language
We consider whether there is statistical evidence for a causal relationship between federal government expenditures and growth in real GDP in the United States, using available data going back to 1791. After studying the time-series properties of these variables for stationarity and cointegration, we investigate Granger causality in detail in the context of a Vector Error Correction Model. While we find causal evidence that faster GDP growth leads to faster growth in government spending, we find no evidence supporting the common assertion that a larger government sector leads to slower economic growth
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