Public Expenditure and Economic Growth Relationship in Developing Countries: The case of Bangladesh

Abstract

This analysis empirically focuses on how government spending affects economic development in Bangladesh. The study uses time-series data from 1965 through 2016 from the World Development Indicators for independent variables household consumption expense, capital formation and public sector consumption spending. The Johansen co-integration test showed a long-run association among the variables. However, OLS results show that capital formation and household consumption expenditure positively and public sector consumption spending negatively affect Bangladesh's GDP. A more productive investment by the government sector may reduce government spending's adverse effects on Bangladesh's GDP