Impact of Government Sectoral Expenditure on Economic Growth in Ethiopia

Abstract

The main objective of this study is examining the impact of government sectoral expenditure on economic growth in Ethiopia over the period 1975–2015. It focuses on sectoral expenditures on economic, social, general services and other services sectors. The major contributions of this study are studying expenditure components in line with the current categorization using up-to-date data. The study uses secondary data collected from the Ministry of Finance and Economic Cooperation of Ethiopia and the National Bank of Ethiopia. It uses both descriptive and econometrics data analysis methods as also the Augmented Dickey Fuller, the Johansen cointegration test and the vector error correction model to test for stationarity and cointegration and to analyze the long run and the short run dynamics of the model. The empirical results show that general services expenditure had a negative and significant effect on economic growth.