Macroeconomic Stabilization Effects of Public Expenditures: Empirical Evidence from Tanzania

Abstract

This study examines macroeconomic stabilization effects of public expenditures in Tanzania. The study used co-integration and error correction modeling approach to analyze effects of public expenditures on macroeconomic stability. The results show that increase in development expenditure enhances macroeconomic stability. By contrast, the results reveal that increase in recurrent expenditure destabilizes macroeconomic environment. Also, the results show that increase in aggregate government expenditure dampens macroeconomic stability. Thus, to nurture macroeconomic stability, government needs to increase development expenditure in the expenses of reducing recurrent expenditure.