Empirical Analysis of Relationship between Per Capita Health Expenditure and Economic Growth Based on Vector Autoregressive Model (VAR) in Mongolia

Abstract

The present research aimed to study the dynamic correlation between per capita health expenditure (PCHE) and economic growth in Mongolia. The data from the period of 1993-2018 were used. A Vector Autoregressive (VAR) model was established between per capita gross domestic product (PGDP) and PCHE. Variance decomposition as well as impulse response function was used to analyze the dynamic relationship among variables. The results revealed that correlation was found between PCHE and PGDP with obvious one-way Granger causality. Moreover, the results showed that economic development had positive impact on PCHE growth for 1 - 3 (short term) years in Mongolia. However, the response of the two variables was gradually eradicated in the long term by impulse response function. The contribution rate of PGDP on PCHE increased from 0% to 18.14% by six periods. This study recommended that Mongolian policymakers not only increase the budget to the health but rather oversee the budget spending, increase public health expenditure and improve private health insurance system, which leads to the upgraded national health and can reduce personal health burden.