المستخلص: |
The Economy of the Republic of Yemen has been facing serious fiscal, economic and political adjustment due to the Gulf crises as well as the burden cost of unification and civil war in 1994, all these factors led to severe structural imbalances in the Yemeni economic structure. The objective of this paper is to examine the causal relationship between government expenditure (GEX) and gross domestic product (GDP) during the period 1990-2007 by using Johansen's co-integration technique, granger causality test and error correction model. The results of (ADF) and (PP) tests shows that both the variables in the levels and first differences are non-stationary times series or integrated of order (1) and exist unit root at the levels of significance 5% , while the co¬integration results reveal to the existence of long-run equilibrium relationship between (GEX) and (GDP) which supported by (ADF) and ( pp) tests. The results of pairwise granger causality test show the GDP Granger Causes GEX (Government expenditure) that is, a unidirectional causality running from GDP to GEX. This result supports the existence of Wagner's law in the Republic of Yemen which implies that the government expenditure in the Republic of Yemen is depend on GDP While the error- correction model results support the existence of long - run equilibrium relationship between (GEX) and (GDP)
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